Highlights from CAAMP’s Fall Mortgage Report

CAAMPFall2014

Mortgage analysts look forward to this day each and every year — that is, the date CAAMP releases its annual mortgage market research.

This year’s edition has a slew of new mortgage findings. We’ve highlighted the items that are eye-catching. (Extra-notable data points are in blue. This author’s comments are in italics.)

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Real Estate/Mortgage Market

9.62 million: Number of homeowners in Canada
5.64 million: Number of Canadian homeowners with mortgages
2.15 million: Number of homeowners with HELOCs
3.98 million: Number of homeowners who are mortgage-free
1.35 million: Number of homeowners with mortgages who have renewed or refinanced in 2014 (to date)
84%: Percentage of recently purchased homes (during 2014 up to the time of the survey) that have a mortgage
4.33 million: The number of renters in Canada
46%: The percentage of buyers who had a mortgage on their previous dwelling (nearly 200,000 people)
49%: The percentage of purchases in 2014 that have been made by first-time buyers (roughly 210,000 people)


Interest Rates

2.89%: The average rate for homes purchased in 2014
3.12%: The average rate for homes renewed in 2014
(Note the difference in the above two rates. This is partly due to the “sign and forget” tendency among some renewers — i.e., some folks take their lenders’ first renewal offer.)
3.06%: The average actual rate for a 5-year fixed rate mortgage in 2014 (this was 1.85 percentage points lower than the typical 5-year fixed “posted” rate)
100%: Percentage of borrowers with 5-year terms who received discounts of at least one percentage point off the average posted rate
1.05 million: Number of borrowers who saw their interest rate fall following renewal (out of 1.35 million renewers)
4%: Percentage of mortgages that have interest rates of 5% or more
78%: Percentage of borrowers who renewed their mortgage in 2014 and saw a reduction in interest rates
13%: Percentage of borrowers who renewed their mortgage in 2014 and saw an increase in interest rates
10%: Percentage who saw no change


Home Equity

75%: Percentage of mortgagors who have 25% or more equity
85%: Percentage of homeowners who have 25% or more equity
(the primary risk group in a big housing downturn are those in the remaining 15% who carry heavy debt loads relative to income — a small fraction of Canadians)
4%: Percentage that have no mortgage but do have a HELOC
12%: Percentage that have neither a mortgage nor a HELOC
3%: Percentage of borrowers with less than 10% equity (275,000 people)


Amortization Periods

12%: Percentage of recently purchased homes with mortgages that have extended amortization periods
(Amortizations over 25 years require a 20%+ down payment.)
17.5: The average number of years that buyers in 2013/2014 expect to take to repay their mortgages
(This is 3.7 years, or 17%, shorter than the average contracted period)


Rate Types

76%: Percentage of recently purchased homes with mortgages that have fixed rates
20%: Percentage that have variable or adjustable rates
5%: Percentage that have combination (hybrid) mortgages


HELOCs

$135,000: The average approved HELOC
$57,000: The average amount owed on HELOCs (42% loan-to-value)
18%: Percentage of HELOC holders who currently owe nothing on them
9%: Percentage of borrowers who have fully utilized their available HELOC


Equity Take-Out

11%: Percentage of homeowners who took equity out of their homes over the past year (just over 1 million homeowners)
$55,000: The average amount of equity take-out
$50 billion: The amount added to Canadian mortgages as a result of equity take-outs
$13 billion: The amount added to HELOCS as a result of equity take-outs

 

Sources of Down Payments by First-time Homebuyers

…for mortgages originated in 2010-2014:

21%: The average down payment made by first-time buyers
(Here’s a number that defies intuition. Certain past data seems to be conflicting:
7 in 10 new CMHC-insured borrowers have LTVs over 90%
*  First-timers most commonly put down less than 10%, according to Genworth
*  70% of first-timers put down under 20%, according to TD
*  Average first-time down payments are 16%, per BMO
*  56% of first-timers said they put down over 20%, according to a different Genworth survey
*  Only 12% of first-time buyers plan to put down over 20%, found RBC
)

40%: Percentage of first-time buyers who used personal savings for their down payment
11%: Percentage of first-time buyers who received a gift from parents and other family members as a source for down payment
(Many thought this number would be bigger, given speculation that kids are increasingly relying on their parents to afford record home prices.)

6%: Percentage of first-time buyers who relied on loans from parents and other family members for their down payment
27%: Percentage of first-time buyers who relied on loans from financial institutions (This number seems high but presumably includes credit lines, cash-back down payments, etc.)
1%: Percentage of first-time buyers who got a loan from their employer
12%: Percentage of down payments that came from RRSP withdrawals, including via the Home Buyers Plan (the share from RRSPs has fallen recently)

 

Nest or Investment

70%:  …of the purpose of a home is having a place to live, say typical homeowners
30%: …of the purpose of a home is as an investment, say those same homeowners

 

Outlook for the Mortgage Market

8.1%: Average annual mortgage credit growth in Canada during the past decade
4.5%: The expected growth rate by the end of 2015

(The most important factor behind mortgage credit growth in Canada is the volume of new housing being completed. Current low interest rates have tended to reduce the rate of growth of mortgage debt. As much as one-quarter of mortgage credit growth is being driven by Canadians moving away from slow-growth communities to high-growth areas where home prices are higher and require larger mortgages. Note also that resale housing activity has been substantially impacted by changes in the mortgage insurance criteria that took effect in July 2012. The negative impacts of those changes have lessened by about one-half, says Dunning, but they are still a significant sales killer. The negative impacts have been greatest in the slow-growth provinces, CAAMP finds.)

 

Actions Taken in the Past Year to Shorten Amortization Periods

16%: The ratio of mortgage holders who voluntarily made lump-sum pre-payments over the past year ($17,500 was the average lump-sum payment in 2014, suggesting that 10% annual prepayment privileges are more than enough for the vast majority of Canadians)
16%: The ratio of mortgage holders who voluntarily increased their regular payments over the past year ($285 was the average increase in payments)
7%: The ratio of mortgage holders who voluntarily increased their payment frequency over the past year
54%: Percentage of mortgage holders who expect to pay off their mortgage in less than the contracted amortization period
62%: The ratio of mortgage holders who did nothing to accelerate their mortgage repayment over the past year
 

Types of Mortgage Representatives Consulted

55%: Percentage of borrowers who obtained their mortgage from a bank
30%: Percentage of borrowers who obtained their mortgage from a mortgage broker
9%: Percentage of borrowers who obtained their mortgage from a credit union
3%: Percentage of borrowers who obtained their mortgage from a life insurance or trust company
3%: Percentage of borrowers who obtained their mortgage from another source
71%: Percentage of borrowers who consulted a bank representative
45%: Percentage of borrowers who consulted mortgage brokers
(If true, this suggests less than half of Canadian mortgage consumers are leveraging brokers to scan the market for better deals — a major waste of a free option.)

 

Consumer Sentiment

91%: Percentage of homeowners who are happy with their decision to buy a house
<1%: Percentage of homeowners who indicated that “I regret my decision  I wish I did not choose to own a home”
4%: Percentage of recent buyers (2010 to present) who say they strongly regret the size of their mortgage
9%: Percentage of survey respondents who disagreed that mortgages are “good debt”

 

Reasons for Not Owning a Home

2%: Percentage of those who don’t own a home because they are nervous that rates will increase
27%: Percentage of those who don’t own a home who say they need more time to save for a down payment

 

Forecast of Mortgage Activity

$1.28 trillion: Projected total outstanding residential mortgage credit by the end of 2014

 


Study details

The data quoted from this report was commissioned by CAAMP and produced by Will Dunning, Chief Economist of CAAMP, in collaboration with Maritz. This report is based on online survey responses from 2,000 Canadians compiled during October 2014. 57% of those surveyed were homeowners with mortgages.

Rob McLister, CMT

  1. Could you explain this (or perhaps confirm a typo?)
    In the Home Equity section:
    75%: Percentage of mortgagors who have 25% or more equity
    85%: Percentage of homeowners who have 25% or more of equity

    1. Hi Brian, Good question. It means that 75% of people with mortgages have a mortgage that is 75% of their home value or less.
      As well, 85% of homeowners (in general) have 75% or more equity. This latter figure includes people with no housing-related debt.

  2. Robert, am I reading this right? If 45% of borrowers overall consulted mortgage brokers and 30% of borrowers overall obtained their mortgages through brokers, then that is a stunning conversion/success rate of 66%! That is mildly incredible.

  3. can you commnt on this post from mortgagebrokerews.ca

    For all current mortgages on homes that were purchased during 2014 up to the time of the survey, 61 per cent were obtained from a bank,” the official report states. “Mortgage brokers had a 31 per cent share. Credit unions were the source for six per cent of these mortgages, followed by two per cent from life insurance or trust companies.”

    These numbers represent a significant change from the mortgage origination breakdown of just a year ago. In 2013, up until the date of last year’s publication, banks accounted for 42 per cent of mortgage market share, while brokers accounted for 40 per cent.

    if this is true has refinance marke share also been lost to the banks?

    1. Hi Bob, According to Will Dunning, broker share was unusually high in 2013. “The 2014 figures are more a return to the prior levels,” he says. Nonetheless, it seems unusual that broker share spiked so much in 2013, only to fall back this year. Neither we, nor Dunning, have a theory to explain it.

  4. Great compilation Rob, seems to me that there is a lot of room for brokers to grow and consumers could use more free options by consultuing with a broker but they only consult their bank.
    Only 45% consulting with a broker or to go back to their bank after scanning for rates, from this number onky 30% stay with brokers. Lots of work to be done as a whole broker industry.

  5. Excellent summary Rob. Once again, job well done!

    Another stat that caught my eye from Mr. Dunning’s report, was that 190,000 homeowners will be retiring their mortgages this year. Congratulations to the prudent, hard working Canadian homeowners out there who find themselves sitting on a nice pile of tax-free capital gains. It’s a great feeling, and welcome to the club.

    1. Appraiser – your financial “advisor” must be REALLY pissed at you ( and me) at this point- all that equity being squandered………..instead of being used to finance the gamblers in the stock market.

  6. You forgot one:
    Reasons for Not Owning a Home
    71%: There’s a bubble about to explode at the first catalyst and we wouldn’t be caught dead with that much risk on a -66% reversion to the mean.

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