Mortgage Rates & Mortgage Broker News in Canada

Mortgage Market Share — Top 10 Lenders

Banks control three out of four mortgages in Canada’s $1.1 trillion mortgage market, and their share has been growing.

We recently spoke with someone who makes it his business to track mortgage market share, David McVay of McVay and Associates Ltd.

Being incorrigible mortgage data addicts, the figures David shared were fascinating. We’ll convey the highlights over the next week.

First off, since everyone loves a good top 10 list, here are the top 10 Canadian mortgage lenders by market share…

Renters and the Rate Influence

More than 1 in 4 renters (~28%) are planning to buy a home in the next two years—according to a recent study commissioned by The Mortgage Group (TMG).

TMG’s president, Mark Kerzner, said that could translate into about 12% growth in homeownership.

Of those surveyed, more than half (54%) said they would likely buy sooner if they expected interest rates to rise 2% or more in the next year.

This buy-before-rates-go-up philosophy is not surprising. A two percent rate increase would cost a borrower over $30,000 more on a 5-year fixed mortgage (assuming an average priced home, 10% down and a 25-year amortization).

BMO: Home Prices May Deflate But Likely Won’t Pop

Canada’s housing market is more like a balloon than a bubble, writes BMO Capital Markets in this report.

It should “deflate slowly” in the absence of a “pin.”

That “pin” (catalyst) could be one of the following, says BMO (our comments in italics):

• An approximately 400 bps increase in mortgage rates (BMO’s Sal Guatieri told CBC today: “We tend to rule out that shock.” But his report notes “Even a moderate two-percentage-point increase to more normal levels would put some strain on affordability and slow the market.”)
• Major job losses
  (BMO is talking on the order of 400,000+. It adds: “Unless Europe’s credit crisis worsens materially, a recession is not in the cards given current low interest rates.”)

CMHC’s 2011 Canadian Housing Observer

CMHC's 2011 Canadian Housing Observer is out.

It’s stuffed with mortgage and housing stats, although most are from 2010 so it’s not as current as we’d hope.

Here are some of its mortgage-related highlights (our comments in italics)…

A “Good Rate” is a Lower Rate for New Brokers

What’s a good rate? Depends whom you ask.

According to a recent Maritz poll, if you ask a new broker you’ll generally be quoted a lower rate than if you asked a veteran broker.

(Click to enlarge)

Maritz’s survey seems to show a clear link between the rate quoted and a broker’s years of experience. Newer brokers, for example, define “good rates” as being half a percentage point less than brokers who have been in the business 20+ years.

We asked industry experts Gary Siegle (Regional Manager, Invis), and Jim Murphy (President, Canadian Association of Accredited Mortgage Professionals) for their take on this data.

Q4 Bank Roundup

The fourth quarter earnings season brought good tidings to certain banks, including TD and RBC who saw profits double.

In the Big 6 banks' lending segments, however, many continued to report declining loan margins as Canada's low rate environment persists.

Below are various mortgage tidbits that we pulled from the major banks’ Q4 reports:

2 Out of 3 Don’t Shop at Renewal

Every now and then we see a mortgage stat that’s a jaw-dropper.

This finding from Manulife Bank is one of them. It suggests there are a lot more people with money to burn than one might expect.

Manulife recently surveyed 1,000 Canadian homeowners between the ages of 30 to 59. Among respondents with a mortgage, two-thirds (65%) did not compare mortgages from more than one lender when they last renewed.

Mortgage Stats from Maritz

Yesterday was Day Two of the CAAMP mortgage conference and it featured one of the most insightful segments: Maritz’s mortgage research findings.

Rob Daniel, Managing Director at Maritz, shared a bunch of thought-provoking nuggets, including these (our comments in italics):

• Canadians pay off their mortgages an average of seven years quicker than their original amortization.
  (Your amortization can always be reduced by prepayments.)
• 40% of consumers have a good understanding of what mortgage brokers do, vs. 33% in 2010.     
  (Nice gain in awareness, albeit 40% shows brokers have lots of work left to do.)
• Broker share jumps 52% when consumers have a good understanding of what we do.
• Broker clients collect an average of 2.8 rate quotes for their mortgage vs. 1.8 for bank customers.

Do Your Golden Years Include Mortgage Payments?

The prospect of still having a mortgage to pay off past age 65 is a growing reality for Canadian homeowners, according to a new survey.

RBC’s latest Housing Snapshot poll found that over half of Canadians expect to be servicing their mortgage after the age of 55, while 27% foresee carrying mortgage debt beyond age 65.

Perhaps most startling, a full one-third of respondents aged 55 or older said they still have 16 or more years left on their mortgage term. It's safe to assume many of those individuals won't be celebrating their retirement party at 65.

CAAMP's Mortgage Market Report - Fall 2011

It’s that time of year again, time when CAAMP releases the most anticipated mortgage research of the year.

Its latest State of the Residential Mortgage Market in Canada report is fresh off the presses and brimming with tidbits for mortgage data buffs.

In CAAMP's media release today, President and CEO Jim Murphy expressed optimism at the steps Canadians have taken over the past year to get their fiscal house in order.

“Despite less than positive feelings towards the economy, or maybe because of that, Canadians are showing a level of prudence in their decisions that is inspiring,” said Murphy. "A vast majority of mortgage holders has considerable capacity to afford rises in mortgage interest rates."

“That suggests to us that there is no need for policy makers to introduce new measures that would reduce housing activity.”

That said, CAAMP noted that there is still a "sizable minority" of 650,000 households who would be "challenged" by rate increases of less than 1%. (Side note: If you've got a mortgage and can't handle a 1% rate increase, maybe it's time to start looking for a good rental?)

In any case, what follows is a closer look at all the data. As usual, our comments are in italics and this time we've highlighted what we found to be extra-noteworthy stats...

Third Quarter Mortgage Tidbits

Third quarter earnings season is over for the Big 6 banks. As always, we've poured through their piles of releases, shareholder presentations and earnings call transcripts to find interesting mortgage-related nuggets.

Here's a summary...

TD’s 2011 Repeat Home Buyers Report

Here’s a look at what repeat home buyers are thinking when it comes to mortgages and housing, courtesy of this recent TD poll:

• 69% of repeat buyers will take out a mortgage on their new home.
• 7 out of 10 recent or prospective repeat buyers said they moved (or were moving) earlier than expected.
  • TD says “Our research indicates that Canadians don’t stay in one home too long.”
  • Among people who don’t plan to stay in their home for 20+ years, the average time that people expect to spend in a home is roughly five years. (Our estimate from TD’s data)

TD Sees 10% Price Drop and Says 40% Now in Variable Mortgages

Average Canadian home prices will slide about 10% within two years, projects TD Economics.

TD says, “Toronto and Vancouver appear most at risk” and will disproportionately weigh down the national average.

The reasoning is all spelled out in this report. TD lists several potential home price killers, including “subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages, and fewer first time home buyers.”

The report also has a slew of mortgage-related findings. Here’s a sampling of those (italics ours):

2011 CMHC Mortgage Consumer Survey

More first-time buyers are arranging mortgages through brokers than ever before (48%). That will surprise some, given all the discounting and sales hiring going on at banks and credit unions.

That statistic and many others are in the just-released 2011 CMHC Mortgage Consumer Survey. 

Among other things, the report also highlights emerging trends in online mortgage research. CMHC reports that over one in five consumers are now using the Internet as their sole source of mortgage information. That trend is still unfolding but as we've written before, the ratio of people who feel they can go it alone will grow—just as it's grown in the online investing market.

Here's a sampling of other key findings (italics ours):

Fewer First-Timers Get Pre-Approved

If TD Canada Trust is right, first-time home buyers haven’t been preparing for mortgages like in the past.

TD’s annual First Time Homebuyers report found that only 76% of respondents said they got pre-approved for a mortgage before house shopping, down from 91% in 2010.

Depending on your qualifications and purchase timeframe, skipping the pre-approval step when buying  can open you up to rate risk and disappointment.

CMHC Statistics from Its Corporate Plan

CMHC is Canada’s largest mortgage default insurer and its Corporate Plan Summary has a load of data about how it operates.

On average, CMHC insures people with good credit, good equity, modest mortgage amounts and traditional (~25-year) amortizations.

Here are other highlights…

Mortgage Tidbits from Banks' Q2 Reports

Canada’s Big Six banks earned a little over $6 billion in the second quarter, but competitive pressures and narrowing mortgage margins were a common theme.

Here’s a look at some of the more interesting mortgage-related items in their Q2 financials.

The Importance of First-Time Buyers

If you've ever wondered how vital first-time buyers are to the real estate market, here's the answer.

The Altus Group's "FIRM Residential Mortgage Survey" shows first-time home buyers accounted for about half of all homes sold in Canada in the last two years. That's more than a quarter million sales each year.

“First-time buyers make the home-sales world go around," states the report. They play "an important role as buyers in the newly built market and also in purchasing existing homes..." 

First-timers are especially vital to lower-end property sales. That's essential to a healthy market because it allows existing homeowners to sell efficiently and then upgrade.

Spring Mortgage Report – CAAMP

Sixty-one per cent of Canadians expect rates to increase in the next 12 months, according to a Canadian Association of Accredited Mortgage Professionals (CAAMP) poll.

That begs the natural question: How prepared are borrowers for higher rates?

“Increased mortgage interest rates…will bring stresses for Canadian mortgage borrowers, but a very substantial majority of them are prepared.” That’s the key finding of CAAMP’s Chief Economist, Will Dunning, in this spring mortgage report.

Dunning cites multiple factors that could mitigate the risk of rising rates, including:

• Income growth
• Accelerated payments (Many borrowers make extra principal payments and can reduce those payments if needed.)
• Fixed rates (Most people have their rates locked in, providing at least some degree of protection.)
• Manageable debt ratios (The average mortgagor’s TDS ratio was just 29% in 2010…vs. the 40-42% maximum guideline.)
• Equity (79% of home owners have 25% or more equity. Equity grows throughout one’s term and serves as a fallback in case of emergencies.)

CAAMP finds that only 25,000 households (out of 9,450,000) have less than 10% equity and are not able to afford mortgage rates over 5.00%.

Here are other key stats from the report (our comments in italics):

Young Homeowners Expect Early Debt Freedom: Poll

 
Call it youthful ignorance or true determination – either way, young homeowners expect to free themselves from the shackles of debt sooner than their parents did.

Manulife Bank’s quarterly Debt Freedom Survey reveals that more than four out of 10 Canadian homeowners between the ages of 30 and 39 anticipate being debt-free by the end of their forties. Another third predict they’ll have their debts paid by their fifties.

Reality, however, paints a very different picture.