OTTAWA – The vast majority of Canadian homeowners are in position to withstand an increase in interest rates, but it may present difficulties for a “sizable minority,” an industry group for mortgage lenders said Wednesday.

The Canadian Association of Accredited Mortgage Professionals said about 12 per cent of those surveyed — representing about 650,000 households — would come under stress if their mortgage rates rose by as little as one per cent.

The report, however, points out that many will have time to improve their finances before mortgage rates actually do rise.

“Most of these have fixed rate mortgages (so) by the time their mortgages are due for renewal, their financial capacity will have increased and the amount of mortgage debt will be reduced,” the report notes.

As well, the vast majority of challenged borrowers have at least 10 per cent equity in their homes.

“There are about 75,000 borrowers who are susceptible to short-term moves of interest rates and have limited home equity, less than two per cent of the 5.8 million mortgage holders in Canada.”

Many economists believe the Bank of Canada won’t move to start hiking interest rates until late next year or 2013, and that rate increases will be moderate once begun because of the weak economy.

In fact, two — Sheryl King of Merrill Lynch and David Madani of Capital Economics — predicted Wednesday the next move from the central bank will be to reduce interest rates, not raise them.

King said she anticipated governor Mark Carney would slash the central bank’s trendsetting rate next year to as low as 0.25 per cent, where it was during the recent recession, from the current one per cent. That would have the effect of lowering variable mortgage rates.

Overall, the mortgage report found Canadians generally satisfied with their home ownership and confident they would be able to withstand an increase in rates.

It was based on an online survey of 2,000 Canadians, slightly more than half of whom have mortgages, conducted in late October.

Despite warnings from Carney and Finance Minister Jim Flaherty that Canadians are taking on too much debt, 84 per cent said they could handle an increase in their monthly payments of up to $200. The average room for rising payments was $750 a month.

The report also finds that Canadians are taking advantage of low interest rates and that three quarters of those who have renewed mortgages this year received a discount from their previous deals. The average interest rate for homeowners is currently 3.92 per cent, down from 4.22 per cent last year.

As well, fewer people are drawing equity out of their homes, and 78 per cent say they have at least 25 per cent equity in their homes.

“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president of the association.

“They are planning ahead, aggressively paying down their mortgage in advance of any further economic jolt.”

Murphy said the survey results suggests that there is no need for Ottawa to intervene a fourth time in four years to cool the housing market.