Annual State of the Residential Mortgage Market in Canada
Canadians say they are comfortable with their mortgage debt but fewer homes are being built: CAAMP
The Canadian Association of Accredited Mortgage Professionals (CAAMP) releases annual fall survey report on residential mortgage market
TORONTO (November 19, 2013) – Canadian mortgage holders have told the Canadian Association of Accredited Mortgage Professionals (CAAMP) in its fall 2013 survey that they are comfortable with their mortgage debt levels and consider mortgages to be a form of “good debt.” The Annual State of the Residential Mortgage Market in Canada report, released today, was authored by CAAMP Chief Economist Will Dunning.
This level of comfort may be due to the fact that Canadians believe they are in control of their mortgages: taking aggressive actions to pay them down, leveraging their equity to consolidate debt or make new investments, taking advantage of low interest rates and increasingly turning to mortgage brokers rather than major banks for their mortgage needs.
Highlights
• Mortgage brokers are gaining share in the overall mortgage market compared to traditional financial institutions: among all new mortgages obtained this year, 40 per cent were obtained through a mortgage broker and 42 per cent from a bank; overall the broker share in the industry has increased from 25 per cent to 28 per cent since last year
• Confidence in the market is strong: less than 10 per cent of Canadians expect that a housing bubble will burst, though the expectation is stronger among younger people
• 80 per cent of homeowners selected at least one of the following emotions when asked about their mortgages: comfortable, confident, content, secure
• More than 80 per cent of Canadian homeowners have at least 25 per cent equity in their homes
• Of the new homes purchased in the past year, 57 per cent were purchased by first time buyers
• 68 per cent of Canadians feel mortgage debt is “good debt”
• For mortgages repaid in the past two decades, actual repayment periods have been 30 per cent shorter than original contracted periods
• This year, 38 per cent of mortgage-holders took steps to accelerate their repayments and shorten their amortizations
• CAAMP projects housing starts in 2014 could be well below CMHC predictions, as much as 17 per cent lower than the average between 2010 and 2012
“Consumer confidence in the mortgage market remains high, especially among people who have owned homes for a longer period. Consumers are paying off their mortgages faster, selecting five-year fixed term rates and agreeing that real estate is a good long-term investment,” said Jim Murphy, AMP, President and CEO of CAAMP.
The report also covers the role housing has played in Canada’s recovery from the 2008/2009 recession, and while it paints a generally healthy picture of the mortgage market, Dunning believes that the current sluggish economy is related to what he sees as a weakening housing market, brought on, at least in part, by the tightening of mortgage insurance rules in summer 2012: "The economic impacts have not been fully felt," said Dunning. "Resale market activity has been reduced but the adjustment to housing starts has barely begun." He projects that by 2014 we could see a 12 to 17 per cent reduction in starts compared to 2010 to 2012.
Broker share in the market
Canadians turned to mortgage brokers when shopping for a mortgage in increasing numbers. The broker share of the business is up from 25 to 28 per cent since last year. Among all new mortgages obtained this year, 40 per cent were through a mortgage broker and 42 per cent from a bank. In dollars, this represents about $55 billion for the mortgage broker channel.
Mortgage repayment
The survey indicates that recent purchasers (those who purchased a home as recently as the 1990s) are more likely to take steps to shorten amortization periods than those who purchased a home earlier. In the past year, 38 per cent of Canadians took actions to help accelerate their repayments, including making lump sum payments, increasing the frequency of repayment or increasing the amount of each payment.
Among mortgages that have been repaid over the past two decades, actual repayment periods were 30 per cent shorter than original contracted periods.
Canadians continue to buy homes, view mortgages as “good debt”
Canadians have continued to demonstrate confidence in the Canadian housing market, with 57 per cent of home purchases in 2013 coming from first time buyers. This is in line with the overall feeling among 68 per cent of Canadians that mortgages are a form of “good debt.”
In fact, this “good debt” is helping Canadians with other forms of debt. Currently, more than 80 per cent of Canadian homeowners have equity ratios of 25 per cent or higher. In the past year, 11 per cent of homeowners have taken out equity, which they are using to consolidate other debts (28 per cent) and make other investments (26 per cent).
The report, Annual State of the Residential Mortgage Market in Canada, is a semi-annual review of the Canadian mortgage market authored by Dunning. The report is based on information gathered by Maritz Research Canada in a survey of more than 2,000 Canadian consumers in October 2013.
For a full copy of CAAMP’s spring survey report, visit www.caamp.org.
About CAAMP
CAAMP is the national organization representing Canada’s mortgage industry. With over 12,000 mortgage professionals representing over 1,700 companies, its membership is drawn from every province and from all industry sectors. CAAMP is the leading provider of service and advocacy for its members and sets the standard for the Canadian mortgage industry. In 2004, CAAMP established the Accredited Mortgage Professional (AMP) designation to enhance educational and ethical standards for Canada's mortgage professionals.
CAAMP’s other primary role is that of consumer advocate. On an ongoing basis CAAMP aims to educate and inform the public about the mortgage industry. Through its extensive membership database, CAAMP provides consumers with access to a cross-country network of the industry’s most respected and ethical professionals.
For more information, please contact:
Jim Murphy, AMP, President and CEO, CAAMP
O: 416-644-5465 / C: 416-940-0011
jmurphy@caamp.org
Jeri Brown, Media Profile
O: 416-504-8464
jeri.brown@mediaprofile.com
