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2015 CMHC First-Time Homebuyers SurveyMore first-time buyers use brokers than any other mortgage channel, 55% of them to be exact.

It’s hard to overstate the importance of that. It makes brokers extremely important conduits for lenders who want clients that represent long-term revenue—and what lender doesn’t?

That fact was established once again with the release of CMHC’s 2015 First-Time Homebuyers Survey. Here are five other stats brokers need to know from that report:

  1. 73% who went online did so to compare other mortgage products.
    • As a broker or lender, do you have ways to help consumers compare your offerings to others?
  2. 30% of first-time buyers found their lender or broker site through online ads.
    • Mortgage providers seem to be increasingly utilizing banner ads, especially retargeting banners, which have up to 70% higher conversion rates. Overall, less than 1 in 1,000 consumers click banner ads. But posting targeted attention-grabbing ads, “above the fold,” and in relevant media can boost click-through to 1 in 100 or better.
  3. 98% of first-time buyers (FTBs) who received a recommendation to use a specific lender ended up using the lender channel.
    • These recommendations are most likely to come from real estate agents. It’s no surprise then that banks pay real estate brokerages up to 50 bps or more for referrals.
  4. 43% of FTBs arranging their mortgage directly with a lender dealt with someone who exclusively specialized in mortgages.
    • It’s your biggest financial obligation, folks, and good advice can pay for itself 10-fold. Choose a mortgage expert, not a jack-of-all trades. If you want investing or insurance advice, get a separate referral.
  5. Providing advice on long-term mortgage strategies can increase a first-time buyer’s satisfaction with their mortgage professional by up to 85%.
    • This is something very few online mortgage discounters focus on. Providing thoughtful, customized mortgage amortization plans is a differentiator for any originator.

Here are a few more stats of interest from CMHC’s report…

Use of Online Resources

  • 83% of FTBs went online to gather information about mortgage options and features (roughly the same as last year, and likely under-reported).
  • Of first-time mortgage shoppers who went online:
    • 53% visited lender sites, while almost one-third (31%) went to broker sites.
    • 70% used an Internet search engine such as Google when looking for lender or broker sites.
    • 84% used an online mortgage calculator.
    • 37% used different social media platforms to research mortgage information (vs.19% for other mortgage consumers).
  • 26% used a mobile device to find mortgage-related information.
    • In about one-in-five cases, mobile users accessed a mortgage-related app.

Interaction with Mortgage Professionals

  • 42% of repeat buyers reported arranging their mortgage through a mortgage broker.
  • 57% of broker users and 54% of lender customers said the desire to get the best rate or deal had a “great deal” of influence on where they got their mortgage.
  • 79% of those receiving a recommendation to use a specific broker ended up using a broker.
  • 72% of first-time buyers who switched financial institutions arranged their mortgage through a broker.

Buyer Satisfaction

  • Half of first-time buyers who received advice from their mortgage professional reported the advice to be “very useful.”
    • There’s clearly a huge opportunity to better educate new homeowners.
  • 34% of first-time buyers “totally agreed” that they got the best mortgage deal for their needs (vs.47% for repeat buyers).

 


Survey note: CMHC’s survey interviewed 788 first-time homebuyers from across Canada. Individuals polled had all undertaken a mortgage transaction in the past 12 months and all were one of the prime decision-makers within their household for matters relating to housing finance and mortgages.


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As the largest mortgage broker firm in Canada, Dominion Lending Centres (DLC) collects loads of valuable statistics. So when we asked for data on how mortgage rate buydowns are affecting brokers, we were very happy it obliged.

Here is some of the information the company provided to CMT. Note: These figures do not include Mortgage Centre Canada, which is owned by DLC:

DLC-Stats

 

The above numbers highlight some notable trends:

  • There’s been only a slight downtrend in broker compensation per deal, suggesting pressure on brokers to buy down mortgage rates has been less than first thought. Since the bulk of successful brokers are older and more experienced at selling value (not just rate), and since online rate comparison is still not mainstream (at least according to Maritz data), it could potentially take 2-5 more years before we see widespread material drops in average basis points per deal. That reflects this author’s best guess only.
  • DLC and Mortgage Centre set volume records this summer, as did multiple other industry firms. That’s likely due to internal growth initiatives to some extent, but we can’t ignore that the mortgage market is exceeding expectations yet again. BMO Capital Markets says mortgage growth is almost back to 6% year-over-year. That’s the highest in two years and 100-200 bps above most analysts’ expectations at the start of the year. This rising tide is lifting more boats throughout the mortgage industry, thanks to astoundingly low rates and non-stop house appreciation in the major metros.
  • DLC’s average volume per agent is up 77% in five years to $7.86 million. That compares with anecdotal industry estimates that range from $4.5 to $5.5 million. DLC has clearly brought on more productive brokers in recent years, and worked hard to train existing brokers how to be more productive. Quality training is not only in the agent’s best interests, it’s vital to a company that relies on a 5% royalty from every commission.

We stress that these numbers should not be extrapolated to the industry as a whole, but they’re thought-provoking nonetheless. Brokers just getting into the business, for example, might find them helpful for benchmarking purposes, as might competitors looking to improve their own production.

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Three out of four Canadian bank customers say their primary bank fails to meet their expectations. That’s according to a recent survey by FIS, whose findings identify key areas where banks must improve.

Banks get high marks for things like in-person service, convenience and online connectivity, but fall short in terms of fairness of fees, following through on promises, rewarding loyalty and transparency of pricing. These shortcomings are something to heed for all bank challengers, including mortgage brokers and credit unions.

Bank-Satisfaction

As a whole, Canadian banks got a 76 out of 100 satisfaction rating (with 100 being the goal). Credit unions fared notably better, scoring 88 out of 100.

Those most happy with banks tend to be older (45-64 years old), while less satisfied consumers tend to be younger (35-44). That younger demographic does 30% more transactions at alternative financial service providers.

Based on FIS findings, banks have three key opportunities to build consumer trust. These are all areas where they underperform:

  • Providing easy-to-understand pricing and terms
  • Following through on promises (although FIS’s report was a bit vague on this point)
  • Being fully transparent on fees and charges

Many brokers and credit unions (but far from all), already do a banner job in these three areas by:

  • Not posting unrealistically high mortgage rates
    • Leading the pack are competitive mortgage brokers and forward-thinking lenders like Meridian Credit Union, all of whom openly advertise better-than-average pricing on their websites
    • By contrast, banks typically advertise above-market posted or special-offer rates, forcing customers to negotiate to obtain competitive discounts. As a case in point, only one of the Big 6 Banks (BMO) is advertising a reasonable 5-year fixed rate (2.59%) at the time of this story, and that’s for a restricted mortgage.
  • Offering products with fair prepayment charges
    • Versus painful bank penalties based on “discounts” from artificially high posted rates
    • Note: Some brokers sell deeply discounted rates with penalties that are just as bad as the banks, if not worse, but any broker worth his/her salt unambiguously explains the tradeoff of those products, while simultaneously offering less restrictive alternatives.

As is visible in the chart above, reliability and security are also crucial to bank customers. Virtually all serious bank challengers also build those elements into their marketing playbooks.

Side Note: FIS’s survey included 1,000 financial decision-makers in Canada, aged 18-75, who have a chequing account, or equivalent, with a financial institution.

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Manulife released new data this week on homeowners’ tendency to prepay their mortgages, as well as their ability to withstand interest rate hikes. Here’s what those numbers revealed.

Prepayment Trends

Mortgages with big prepayment allowances save a small fraction of the population a lot of interest. There’s no disputing that. But for most, they are one of the more over-rated mortgage features. Manulife’s Homeowner Debt Survey supports that assertion.

The report found that while 40% of mortgage holders paid extra on their mortgage last year, those payments totalled only 3.3% of the average Canadian’s mortgage balance (which is $190,000). Moreover:

  • Fewer than 1 in 15 mortgagors pre-paid more than $10,000.
  • Only 1 in 50 prepaid more than $25,000 (i.e., more than 13% of the average Canadian mortgage balance).

This chart from Manulife helps explain why 6 in 10 mortgagors are passing up prepayments.

 

Extra payments

Borrower Stability

It’s encouraging that 56% of homeowners said they reduced their debt in the past year. That’s up from 51% a year ago.

Clearly, the majority of borrowers have household debt under control. But Manulife’s survey revealed some sobering statistics on the minority, like the fact that 40% of homeowners claim they’d struggle to make their mortgage payments within three months of being out of work.

In the event that the primary income-earner lost his/her job:

  • One in six homeowners said they’d struggle to make their regular mortgage payment within just one month.
  • Over a quarter (27%) would struggle to do so after three months.

And then there are interest rate hikes to consider:

  • More than a third of homeowners surveyed would encounter “financial difficulty” if their mortgage payment increased by just 10%.
  • 15% of mortgagors said they could not absorb any increase in their payment.

Now, mind you, surveys have a funny way of drawing out biased responses. And this may be one of those cases.

CAAMP economist Will Dunning told Amanda Lang his research suggests that many people have paid more than they’re paying now. Yet those same people say they can’t afford higher payments.

“Probably, they’re not telling us what they can afford,” he said. “They just don’t want to see their payment rise…”

Whatever the case may be, it appears there is still ample room for financial improvement before a sizable minority of homeowners achieve a good night’s sleep.


The Survey: The Manulife Bank of Canada poll surveyed 2,372 Canadian homeowners between ages 20 to 59 with household income of $50,000 or more. The survey was conducted online by Research House between February 10 and 27, 2015. National results were weighted by province, income and age.

 

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CAAMP’s semi-annual mortgage surveys have gobs of data that gauge the pulse of the market. But the best parts of these reports are the new data points that shed light on previously unexplored topics. This year’s Spring Survey didn’t disappoint in that sense.

It reveals brand-new numbers on topics ranging from the risks of increasing the minimum down payment to pre-approval utilization to mortgage rate shopping habits.

Without further ado, below are the key numbers with selected key stats in red. Our comments in italics.

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CAAMP Spring report 2015

Who’s buying homes today?

  • 620,000 households move into dwellings they have purchased each year.
  • 45% (280,000) are first-time buyers.
    • Most of these are between the ages of 25 and 34.
  • Just over 20% (130,000 per year) are making their second purchase.
  • One-third (210,000 per year) are making their third or subsequent purchase.

 

What are they buying?

  • 57% (360,000 people) bought single-detached homes.
  • 10% (60,000 people) bought semi-detached homes and row homes.
  • 19% (120,000 people) bought condominium apartments.
  • Of the above housing types, the percentage of units that sold for more than $1 million was: slightly above 1%.
  • For repeat buyers, the average difference between prices paid for newly acquired homes versus prices received for the homes they sold was: $28,500.
  • The percentage of these repeat buyers who purchased a home with a lower price than the one they sold: 38%.
  • The percentage of repeat buyers who “move sideways”  — that is bought and sold a house at around the same price: 1%.
  • The percentage of buyers who “moved up” — i.e., bought a more expensive house: 61%.
    • One mortgage feature that is routinely undervalued is a competitive port and increase option. If there’s a reasonable chance you’ll move and need a bigger mortgage before maturity, then (other things equal) lean towards a lender that provides:
      • the ability to increase the mortgage with no penalty
      • more than 30 days to port the mortgage with no penalty
      • assurance of a competitive rate on any new money that you add to your mortgage
      • no restrictions against refinancing elsewhere (for maximum flexibility)

 

Financing Methods

Some stats on down payments:

  • The average down payment made by homebuyers in the survey: $119,000
    (or about one-third the price of the home).
  • The average down payment made by first-time homebuyers: $67,000
    (or 21% of their average purchase price).

    • Despite the consistency of this number in CAAMP’s reports, this is one stat we can never wrap our head around. RBC found a few years back that only 38% of first-time buyers planned to make a down payment more than 10%. For the last two years, BMO has found the average first-timer’s down payment to be 16-19%. Perhaps it’s a matter of how the question is posed to respondents.
  • Percentage of first-time buyers who put down 20% or less: 62%.
    • This number isn’t as useful as it could be. We’d love to see stats on the number of newbie buyers who put down less than 20% (i.e., the number who needed default insurance or secondary financing above 80% loan-to-value).
  • Percentage of overall buyers who put down 20% or less: 49%.
  • Percentage of buyers who got a loan from a separate financial institution, to form part of their down payment: 1%.
    • Perhaps we’ll see a tiny uptick in this number given that
      • default insurance premiums have been increased for LTVs above 90%
      • cash-back down payments are dead as of July, and
      • parental gifts may not be able to keep pace with rising home prices.

CAAMP assessed what would happen if the minimum down payment were raised to 10% (rather than today’s 5%). It found:

  • The percentage who would have been “definitely not able” to make the purchase was 6%, or 35,000 buyers.
    • If home prices keep shooting for the moon in the GTA/GVA, 35,000 affected buyers may not be enough to convince regulators that raising the minimum down payment is a bad idea.
  • The number who would have been “probably not able” to make the purchase: 80,000.
    • This number is the wildcard. No one knows how many buyers would find a way to scrape together a bigger down payment. Home hunters can get pretty creative. On the other hand, if even half of these people couldn’t buy, and we add that to the above 35,000, then we’re talking about removing over 10% of sales from the market in a given year.

“A 10% down payment requirement would have resulted in a reduction of sales large enough to have tipped many local housing markets into downturns, causing price reductions, which would have caused significant negative consequences for local economies,” says study author and economist Will Dunning.

 

Sources of down payments

  • For overall buyers, percentage of down payment that came from loans and gifts from parents and other family members: 7%.
  • For first-time buyers, percentage that came from loans and gifts from parents and other family members: 18%.
    • This is a noteworthy increase from the 11% figure for 2010-2014 home buyers.
    • Note that Genworth Canada recently found that 28% of its first-time insured buyers used gifted money for part/all of their down payments.
  • For overall buyers, percentage of down payment that came from RRSP withdrawals (typically via the Homebuyers Plan, but not always): 3%.
  • For first-time buyers, percentage that came from RRSP withdrawals (typically via the Homebuyers Plan, but not always): 10%.
  • Percentage of down payment funds that came from credit cards: 0.2%, or $100 million.
    • Default insurers are sometimes criticized because they allow credit card down payments. This stat suggests the risk is far less than some believed. Either way, you can bet your boots that lenders and insurers are underwriting such applications extra carefully. That and insurance premium surcharges help keep credit card down payments a very contained risk.
  • Percentage of down payment funds from overall buyers that came from Tax-Free Savings Accounts: 2%.
  • Percentage of down payment funds from first-time buyers that came from Tax-Free Savings Accounts: 5%.
  • Of buyers who had used funds from an RRSP, percentage who had borrowed money to top up that RRSP: 16%.
  • Number of the 620,000 annual homebuyers who bought their home outright (with no financing on the property): 80,000.

Of purchasers with mortgages:

  • Percentage who chose fixed-rate mortgages: 72%.
    • 51% of Canadians choose a 5-year fixed, Dunning tells CMT.
  • Percentage who chose variable or adjustable rate mortgages: 21%.
    • 6% of mortgagors choose variable rates with terms less than five years.
  • Percentage who chose a hybrid (part fixed and part variable): 7%.
    • Hybrids, which offer valuable interest rate diversification, are perennially the most underrated mortgage term in Canada.

 

The process

Mortgage originations:

  • Percentage of mortgages that were from banks: 52%.
  • Percentage of mortgages that were from brokers: 34%.
    • The remainder of Canadians used credit unions, insurance companies, trust companies and other lenders.
  • First-time buyers are more likely to use mortgage brokers than any other segment. 39% do so.
    • This is a glaring difference from CMHC’s recent estimate (55%). Dunning suggests the number may differ because of how the survey question is asked. “…Many consumers won’t know the difference between a mortgage broker versus a mobile mortgage specialist,” he said. “For that reason our wording is specific, asking about [a] ‘representative from a Canadian bank’…”
  • Percentage of first-time buyers who obtained their mortgage from a bank: 47%.
  • Percentage of buyers who have purchased two or more homes who obtained their mortgage from a bank: 58%.

 

What are they buying?

  • Average price paid by a first-time buyer, from 2013 to present: $308,061.
  • Average price paid by overall buyers, from 2013 to present: $347,361.
  • Percentage of second-time purchasers who ‘moved up’ to a pricier property: 75%.

 

Prices paid by homebuyers vs. their initial planned price:

  • Percentage of buyers whose actual price was 100%-109.9% of their target budget: 19%.
  • Percentage of buyers whose actual price was 110%-119.9% of their target budget: 5%.
  • Percentage of buyers whose actual price was 120% or more of their target budget: 3%.

Resale prices TO-Van vs ROC

This graph above depicts Canada’s two-tier housing market, perhaps as well as any.

 

Percentage of Pre-Approved Amounts That Were Actually Borrowed

  • Actual prices paid were 93% of the buyers’ target maximum budget, on average.
  • Percentage of pre-approved mortgage amounts that were actually borrowed by overall buyers: 76% was utilized.
  • Percentage of pre-approved mortgage amounts that were actually borrowed by first-time buyers: 81% was utilized.
  • Percentage of buyers who borrowed all of their pre-approved mortgage amount: 12%.
  • Percentage of buyers who borrowed more than their pre-approved mortgage amount: 6%.

 

Mortgage Insurance

  • Among overall homebuyers who have mortgages, percentage who report that their mortgage is insured: 55%.
  • Among first-time homebuyers who have mortgages, percentage who report that their mortgage is insured: 63%.

 

Terms for Mortgages (for homes purchased from 2013 to present)

  • Percentage of buyers who chose a term of 1 year: 4%.
  • Percentage of buyers who chose a term of 2 years: 8%.
  • Percentage of buyers who chose a term of 3 years: 9%.
  • Percentage of buyers who chose a term of 4 years: 7%.
  • Percentage of buyers who chose a term of 5 years: 67%.
  • Percentage of buyers who chose a term of 7 years: 1%.
  • Percentage of buyers who chose a term of 10 years: 4%.
  • Percentage of buyers who chose mortgage terms of less than five years: 25%.
  • Percentage of buyers who chose mortgage terms longer than five years: 5%.

 

Amortization Periods for Mortgages (for homes purchased from 2013 to present)

  • Percentage of buyers with amortizations of 25 years: 51%.
  • Percentage of buyers with amortizations of more than 25 years: 14%.
    • In many cases, amortizations over 25 years are underutilized. Paying off a mortgage is frequently not the best use of cash, depending on the borrower’s other opportunities and debts.
  • The average amortization period for overall buyers: 22.1 years.
  • The average amortization period for first-time buyers: 22.7 years.
  • The number of years earlier that borrows expect to pay off their mortgage, ahead of their contracted amortization: 5 years.

 

Average interest rates

  • The average interest rate for homes purchased in 2014: 3.00%.
  • The average interest rate for homes purchased so far in 2015: 2.68%.
    • This reflects the heavy concentration in higher-priced long-term fixed-rate mortgages, and the fact that some folks don’t shop rates as much as they could.
  • Percentage of buyers who gave relatively little consideration to the possibility of interest rates rising in the future: 15%.
    • Stress testing a mortgage is easy and always best practice: Here’s a calculator that can help.
  • Percentage of buyers who gave quite a lot of consideration to the possibility of interest rates rising in the future: 60%.

 

The process

Factors prompting decision to buy

  • Percentage of first-time buyers who were prompted by low interest rates: 25%.
  • Percentage of overall buyers who were prompted by low interest rates: 18%.
    • That’s almost 1 in 5. One can only imagine the reverse impact of a rising rate environment.
  • Among buyers with financing, the average number of mortgage professionals they consulted was: 1.2.
    • This number is too low. It never hurts to get a second opinion, no matter how much you trust your mortgage adviser.
  • Percentage of borrowers who said they did not obtain any rate quotes: 9%.
    • This likely means they accepted the offer from their usual financial institution—a costly decision in the majority of cases. 
  • The average number of quotes received by borrowers was: 1.6.
  • Percentage of mortgage borrowers who consulted with major banks: 76%.
    • For most Canadian mortgage shoppers, banks are still the first stop for person-to-person quotes and mortgage advice.
  • Percentage of mortgage borrowers who consulted with brokers: 56%.

 

Circumstances, Expectations and Opinions

  • Percentage of buyers who were employed full time at the time they bought their house: 69%.
  • Percentage of buyers who were self-employed at the time they bought their house: 5%.
  • Percentage of buyers who were retired at the time they bought their house: 14%.

 

Homebuyers’ Expectations for Interest Rates

  • On a 10-point scale of interest rate expectations, with 10 meaning they are expected to “go up drastically,” the score given by buyers for interest rates in the five years: 6.9.
    • Right or wrong, economists and most commentators continually reinforce this idea of coming rate hikes.

 

Mortgage Market

Here’s an interesting and somewhat unintuitive observation from the report. CAAMP’s Will Dunning notes that very low levels of interest rates mean that Canadians are paying less interest and have more money available to repay their mortgage principal.

“Therefore, a statistical analysis shows that reductions in interest rates in Canada tend to reduce the rate of mortgage credit growth…”  

This applies to today’s market, now that we’re near a purported bottom in rates. Clearly, over the long term, falling rates have had a very real impact on home prices and mortgage volume.


 

By Robert McLister & Steve Huebl

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CMHC consumer survey2015Around this time each year, CMHC releases its Mortgage Consumer Survey, a keenly insightful report for anyone in the mortgage business.

It’s loaded with industry stats, including this year’s headline number: broker market share. CMHC now pegs broker share at 42% of mortgage originations among repeat buyers.

Among the coveted first-time buyer segment, brokers now own the lion’s share (55%) of the market. Last year it was 48%. Lenders who are not in the broker channel, take note of this trend.

But this isn’t all that’s eye catching. Per usual, we’ve combed through this year’s report and yanked out all the other good stuff. If you’re pressed for time, check out the “must-read” data that’s highlighted in red. (The comments in italics are ours.)

 

Online Information Gathering

  • 78% of mortgage consumers turned to various online sources to discover mortgage options and features (unchanged from 2014).
  • Out of that 78%:
    • 67% used an Internet search engine
    • 23% said they found their lender website through online advertising
    • 28% said they found their broker website through online advertising
      (This can include search engine pay-per-click ads, online banner ads, rate comparison sites, etc.)
  • 70% of mortgage consumers who went online used a mortgage calculator.
    • 51% used a calculator from a lender website
    • 16% used a calculator from a broker website
  • Of those using an online mortgage calculator:
    • 62% used one to determine mortgage payments
    • 33% used one to compare mortgages
    • 34% used one to gauge mortgage affordability
  • 17% of mortgage consumers reported using a mobile device.
    • 22% of those used a mortgage-related app
      (As reported last week, comScore found that 88% of a typical smartphone user’s time is spent using apps. Apps are clearly used much less for mortgage shopping than for other things.)

 

Broker Share and use

Broker share continues its upward trend:

  • 42% of mortgage originations among repeat buyers are handled by mortgage brokers.
    • Versus 32% in 2012
      (Among other things, industry advertising initiatives, the media and the internet rate ads may be playing key roles here.)
  • 55% of mortgage originations among first-time buyers are handled by mortgage brokers.
    • Versus 48% in 2012 and 2014
  • 21% of those renewing used the services of a mortgage broker.
    • Versus 23% in 2014
      (This number has still been uptrending over the long term. In 2010 it was 13%.)
  • 79% of recent buyers said they were satisfied with their experience using a broker.
  • 72% said they would likely use their broker again in the future.
  • 73% said they would likely recommend their broker to family or friends.
  • 17% of clients reported changing brokers during the mortgage process.
    • 35% of those said they changed in order to get a better rate
      (This was the number one reason for the switching.)

 

Lender Loyalty and Channel

  • 42% of recent homebuyers used a mobile mortgage specialist to arrange their current mortgage.
  • 79% of recent homebuyers said they were satisfied with their lender experience (same as with brokers).
  • 76% said they would likely use their lender again in the future.
  • 69% said they would likely recommend their lender to family or friends.

Lender satisfaction among recent buyers, by channel:

  • 84%: were satisfied with their mortgage specialist.
  • 77%: were satisfied with their branch rep.

Most mortgage consumers remained loyal to their existing lender:

  • 86% of renewers remained loyal to their existing lender.
  • 77% of repeat buyers remained loyal to their existing lender.
    • Versus 67% in 2014
  • 47% of first-time buyers arranged their mortgage with their primary financial institution.
    • Versus 54% in 2014

Of those who switched lenders:

  • 60% used the services of a mortgage broker.
    (Same as last year.)
  • 63% cited interest rate as their primary reason.
    • Versus 40% in 2014
      (This is a major change in just 12 months, which makes us a bit skeptical. Consumer education, falling rates and the growing prevalence of rate comparison tools may partly contribute to this surge.)

 

Product offering from mortgage professionals

  • 72% of broker clients reported being offered mortgage life insurance.
  • 78% of lender clients reported being offered mortgage life insurance.
    (What this doesn’t tell you is that lender penetration rates are notably greater than brokers’ for creditor life products. Mind you, we’re unaware of good data on this phenomenon. It’s more of an anecdotal observation based on lender and supplier reports.)
  • 48% of broker clients reported being offered a line of credit.
  • 66% of lender clients reported being offered a line of credit.

 

Renewal Process

  • 71% of renewers reported they were notified in advance by their lender that their renewal date was approaching.
    • 67% of those were notified within three months of their scheduled renewal
  • 23% indicated they were contacted in advance by a mortgage broker regarding their upcoming renewal.
  • 60% renewed before their scheduled date.
    (Lenders love to lock up clients early—to keep them from shopping around.)
  • 61% reported they were “totally satisfied” with their decision to renew in advance of their actual renewal date.
  • 55% said their main reason for renewing in advance was to avoid a perceived increase in rates.
  • 19% indicated that the main reason for renewing early was because their mortgage professional convinced them that it was the right decision.
  • 49% of renewers have their mortgage payment set higher than the minimum required payment.

Advising renewal/refi clients to keep mortgage payments at the same level (to reduce their amortization) can lead to a:

  • 66% increase in likelihood of using the same mortgage professional again.
  • 55% increase in client satisfaction.

 

Customer follow-up

  • 50% of mortgage consumers who used a broker were contacted by their mortgage professional following their mortgage transaction.
    • Versus 51% in 2014
  • 34% who used a lender were contacted.
    • Versus 35% in 2014
  • 40% of mortgage consumers “totally agreed” that their post-transaction contact was useful.
    (Are people getting tired of home improvement and gardening tips from their mortgage advisor?)

Types of follow-up contact mortgage consumers would have considered useful:

  • Advice on long-term mortgage financial strategies.
    • 25% of lender clients
    • 32% of broker clients
  • Housing market information.
    • 13% of lender clients
    • 21% of broker clients
  • Information on how to manage financial difficulty.
    • 14% of lender clients
    • 17% of broker clients
  • Investment opportunities.
    • 14% of lender clients
    • 17% of broker clients

 

And perhaps the number-one stat that should leave an impression on any aspiring (or seasoned) broker:

  • Post-transaction contact with clients can increase the likelihood for repeat business by nearly 53%.

 


Survey background: CMHC’s survey was conducted online and polled 3,510 recent mortgage consumers who had undertaken a mortgage transaction in the preceding 12 months. CMHC has conducted this survey since 1999.


 

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If you’ve ever wondered how first-time buyers are affording ever-bigger down payments, BMO may have the answer: parental assistance.

BMO’s 2015 Home Buying Report found that 4 in 10 (42%) of first-time buyers are relying on their parents or other family members to pitch in for a down payment. And this reliance is increasing along with home prices. It’s up 12 percentage points from last year and 15 percentage points from 2013.

On average, first-time buyers now plan to spend $312,700 on their first dwelling. That’s 29% less than the national average home price and it reflects about a $1,400 a month payment with 5% down.

The average down payment for a first-time buyer is much higher than 5%, however. It now stands at $59,413, or 19% of the purchase price. That’s up from 16% in both 2014 and 2013.

Meanwhile, for rookie buyers needing family assistance for their purchase, they’re expecting parents or loved ones to pony up an average of 12% of the property value in equity.

But first-timers aren’t the only ones looking to family for help. Repeat buyers wanting to upsize are also increasingly relying on financial assistance from relatives – 42% of them to be exact. They expect their family to contribute a not-so-modest 20% of the property value in equity. Three cheers for generous parents.

As one might expect, these ‘upsizers’ are shopping with substantially higher budgets as well ($473,900), along with higher down payments ($123,214 on average, or 26%).

Other tidbits from BMO’s Home Buyer Report:

  • 48% of first-time buyers are willing to enter into a bidding war to secure their dream home (up from 35% in 2014)
  • 36% of upsizers are willing to enter a bidding war
  • Without help from their family, an eye-opening 40% of first-time buyers and 50% of those wanting to upsize say they wouldn’t be able to afford their home.

We can’t help but wonder how future generations will fare if more parents are unprepared for retirement and unable to donate such large chunks to their children’s home-buying dreams. No one knows when this trend will turn, but if it does, it could have a measurable impact. Indeed, the parental assistance effect may be meaningfully underestimated in Canada’s housing market as it is.


Sidebar: BMO recommends buyers of all types stick to the “one-third” rule if they want to ensure they are living within their means. Simply put, total housing costs, such as mortgage payment, property taxes, heating costs, etc., shouldn’t consume more than one-third of one’s overall household income.


Robert McLister & Steve Huebl

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genworth-canada-newWith 35-50% of home sales attributed to first-time buyers (depending on the year and survey), it’s vital for mortgage marketers and industry watchdogs to understand the traits and risks of this demographic. That includes understanding how well prepared young Canadians are to buy a home, and to handle rate hikes, price corrections and unemployment.

Genworth and Environics polled some 1,800 first-time homebuyers recently to get a handle on these questions. We delved through their report to pull out the meatiest data. Here are six findings of note about first-time buyers:

  1. They’re paying more than ever
    • The numbers: The median price paid by a first-timer is now $293,000 nationwide ($420,000 in Vancouver)
    • As prices increase, so do the minimum down payments and default insurance premiums. Sixty-three percent of today’s first-timers get insured mortgages with the median down payment being $34,000 (12%)
    • In big cities in particular, countless young borrowers wouldn’t have a hope of home ownership were it not for default insurance, gifted down payments and borrowed down payments. Nationwide, 28% use a gift or loan to bolster their down payment. Contrast that with 40% in Vancouver
  2. Big lump-sum prepayment privileges often go to waste
    • The numbers: Just 1 in 4 first-timers (26%) made a lump-sum prepayment in the past year
    • Some pay 10-20 basis points more for mortgages with bigger prepayment options. In many cases that’s a complete waste of money. Five or ten percent lump-sum prepayments are more than ample for the vast majority of first-timers
  3. It often takes two 
    • The numbers: 62% of first-time buyers purchased with a spouse/partner
    • That means there’s generally two incomes (roughly $90,000 to $100,000 total on average, says Genworth), helping them qualify for a bigger mortgage and better absorb potential rate hikes
  4. They’re going to have kids
    • The numbers: Almost 6 in 10 (59%) are planning for children in the next five years and another 17% aren’t sure
    • This implies that many will need to up-size their property. In fact, half refer to their purchase as a “starter” home
    • That heightens the importance of picking a mortgage with either good refinancing terms or a fair penalty calculation (in case they have to increase and/or break the mortgage early)
  5. Debt ratios are mostly conservative
    • The numbers: The average Genworth-insured borrower has a 34% total debt service (TDS) ratio
      (Thank you, Genworth, for providing this data, which has been hard to come by. We have no idea why CMHC doesn’t do the same.)
    • The ratio has “crept up gradually over the last couple of years,” which is a function of rising home prices, says Genworth CEO Stuart Levings
    • Once you start getting up to 40%+ TDS, that’s “high,” Genworth says
    • About 8% of Genworth’s portfolio is in the 42%+ range. These tend to be folks with higher earning potential–many of them professionals
    • There’s a large buffer between the average (34%) and the maximum allowed (44%), which acts as a shock absorber for rate hikes
    • Genworth estimates the average first-time homebuyer’s debt ratios would increase 2 points (e.g., from a 34% TDS ratio to 36%) for every point that interest rates increased.

Young couple looking at their new houseOther notable first-time buyer stats:

  • 80%+ choose fixed rates
  • 73% rated mortgage brokers/specialists as important sources for mortgage info (31% consulted a broker and 66% consulted a lender’s specialist)
  • 66% rated bank/credit union representatives important sources for mortgage info
  • 61% rated personal finance websites and media websites as important info sources
  • 80% of respondents bought an existing re-sale house
  • 20% bought new construction
  • 55% bought a fully detached home
  • 17% bought a condo (47% in Vancouver, 40% in Montreal and 39% in Toronto)
  • 16% don’t plan to have kids
  • 20% were born in another country
  • 73% rented before buying
  • 24% lived with parents/other relatives before buying
  • 39% strongly (10%) or somewhat (29%) agree that they are concerned about making ends meet month to month
  • 61% pay off their credit cards in full each month
  • 7% pay only the minimum balance on their credit card
  • 86% of millennials “want to own a home” (Source: Royal LePage survey)

Here’s Genworth’s statistics presentation for those who want to delve deeper into the numbers.

 

 

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Street Capital FCStreet Capital, the broker channel’s #3 lender in market share, updated the industry on its bank licence application Wednesday, essentially saying there’s not much to report.

Its comments came as part of the 2014 year-end financial release from its parent company, Counsel Corp. (TSX:CXS)

“We do not want our stakeholders to draw any conclusions regarding the application process from the fact that no announcement has been made regarding receipt of Letters Patent to date,” Allan Silber, Chairman and CEO of Counsel Corporation, said in the company’s release.


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AlbertaHousingWe’ve seen the headlines about the softening housing market in Alberta and Saskatchewan. But how much of a threat do declining home prices there pose to the rest of the country?

Little, according to a report from National Bank of Canada (NBC).

While the Canadian Real Estate Association reports that seasonally adjusted home sales in Alberta and Saskatchewan are down 33% from November (compared with a 3% decline nation-wide), report author and Senior Economist Marc Pinsonneault says, “To date there is no indication that the hit to the Alberta and Saskatchewan housing markets has propagated to large centres elsewhere in Canada, such as Toronto and Vancouver.”


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