State of the Residential Mortgage Market in Canada
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 between from October 20 and 25, 2011
The Real Estate Market
13.6 million: The number of households in Canada (9.55 million of these are owner-occupied)
$3.017 trillion: Value of owner-occupied housing in Canada
7.27 out of 10: Respondents’ average rating of the statement: “Real estate in Canada is a good long-term investment”
[A rating of “1” means they disagree completely. A rating of 10 means they agree completely.]
450,000: Housing resales in the past year (source: CREA)
184,800: Number of housing starts forecast for 2011 (vs. 190,000 in 2010)
The Mortgage Market
5.80 million: Number of owner-occupied households with mortgages
3.75 million: Number of owner-occupied households that do not have mortgages
80%: Percentage of people who get a mortgage when buying a home
7.7% ($80 billion): The forecasted growth in residential mortgage credit for 2012, according to report author Will Dunning. (For 2012, the expected growth is 7.3%.)
Mortgage Type
60%: Percentage of mortgage holders with a fixed rate mortgage
72% of which have always had a fixed rate
28% had a variable at some point
Half of this 28%, or roughly 450,000 households, switched from variable to fixed within the last 12 months
31%: Percentage of mortgage holders with variable or adjustable rate mortgages
33% say their mortgage was always variable/adjustable
The remaining two thirds have switched from fixed rates. Of those:
22% (or 400,000 households) made that switch within the past year
45% switched more than a year ago
8%: Percentage with “combination” mortgages (i.e. part variable and part fixed…aka., hybrid mortgages)
[People just aren’t biting on hybrids, despite the advertised benefit of diversifying one’s interest rate exposure.]
Interest Rates
3.92%: Average interest rate paid by mortgage holders
Down from 4.22% a year ago
1.46: The estimated average discount rate off posted 5-year fixed rates (in percentage points)
Affordability
$750: The average increase in monthly mortgage payments that would cause mortgage holders to become “concerned” with their ability to continue making payments
[CAAMP states that the figures are comparable when you look at people who got mortgages in the last 12 months. That is reassuring. Mind you, many of these people are long-time mortgage holders who have small mortgages and small mortgage payments, and can thus handle a big increase.]
12%: would have difficulty with a rate increase of less than 1%
[This amounts to 650,000 people. CAAMP says most of these homeowners have fixed rate mortgages, which provide them with ample time before renewal to build more equity and improve their financial capacity. 88% of these borrowers have 10% or more equity in their homes.]
3%: Percentage who say they have no room for an increase in monthly payments
8%: Percentage who would have difficulty with a monthly payment increase of $100 or more
[This drops to 5% for those who originated a mortgage within the past year]
75,000: The number of borrowers who would be adversely impacted by interest rate hikes in the short-term and have limited equity in their homes
[This segment amounts to less than 2% of Canadian mortgage holders, says CAAMP.]
Home Equity
Of home owners with mortgages and/or lines of credit:
2%: May have negative equity
4%: Have equity of less than 10%
16%: Have equity of 10%-24.9%
78%: Have 25% equity or more
10 % The number of mortgage holders who took out equity from their home within the past year
[This compares to 18% last year, quite a drop.]
$49,000: The average amount of equity withdrawal
$28.5 billion: Collective value of equity take-outs
$11 billion: Amount used for debt consolidation and repayment (62% of borrowers who refinanced cited this as a purpose)
$5 billion: Amount used for home renovations (40% of borrowers who refinanced)
$6 billion: Amount used for education and other spending (22% of borrowers who refinanced)
$3.5 billion: Amount used for investments (8% of borrowers who refinanced)
$3 billion: Amount used for “other” purposes (6% of borrowers who refinanced)
Professionals Consulted when Obtaining Current Mortgages
In the last 12 months:
55%: obtained their mortgage from a bank (unchanged from last year)
[For renewals and refis, 67% used a bank. That’s up conspicuously from 57% last year.]
27%: obtained their mortgage from a mortgage broker (vs. 25% in last year’s report)
18%: obtained their mortgage from other sources (credit unions, etc.)
(Resource: TD Canada Trust)