State of the Mortgage Market

December 13th, 2012

Last week saw a set of survey statistics published by our national association, CAAMP.

The link to the file is HERE. This is a summary of what they term “significant” statistics.

I thought I would go through several of these and provide additional commentary.

Nationwide the breakdown of all mortgages works out to 65/28/7% (fixed/variable/combo). In this low rate environment, generally in 2012 folks have worked under the logical assumption that at some point rates MUST go up. To hedge against that eventuality, consumers this year have opted strongly in favour of fixed rates. The stats for this year alone demonstrate that with the breakdown as 79/10/11. Interesting to note that although the majority went with fixed there was still some movement to combo mortgages (both a fixed portion and variable, some even a third option of a HELOC). That tells me there are some people, despite this being the lowest rates since the beginning of tracking rates, still feel that rates could go lower.

Yes, for a brief time sometime in 2010/2011 I did get a variable rate mortgage for someone at Prime – 0.6 (at the time around the 2% mark). That is the absolute rock bottom I’ve ever seen anyone get. You never know the variable market might spring back to life again sometime in the near future, but realistically it hasn’t changed offsets in almost a full year. Little bumps here and there to a whopping prime minus 20 for about a week. For the most part it has been hanging around the prime mark, fighting head to head (and losing it appears) with fix rates in the same range.

The next stat, I’ll call a little skewed. 68% of mortgages were at 25 year amortizations or less. Come on. Seriously? The 25 year rule change came into effect in the middle of the spring rush. One would hope that the majority NOW would be 25 or less. What percentage were maxed previously? This also indicates that 32% of the market got MORE than 25 years. Were these conventional deals, where 30 years is still available from most lenders? Were these switches with CMHC who still guarantees the previous 40/35/30 year amortizations?

32% of mortgage holders in general are making additional payments. I have to wonder how many of those spoke with a broker who told them about pre-payment options and how they could payout the mortgage faster and save potentially 100’s of thousands of dollars in interest by doing so? This is one of those things that people ask for, but as one lender put it less than 5% actually use any prepayment option. This to me strikes me as a healthy financial decision that people clearly are making more so than in previous years.

I had to read the next item a few times before I understood it. Related to the above item with pre-payments, the time to pay out most mortgages is on average 2/3rds of the contracted time. So if you had a 30 year amortization, you’d be making your last mortgage payment at the 20 year mark. Generally people hate making mortgage payments and do what they can to complete the payout sooner rather than later. We’re good Canadians and want to pay off our debts. 🙂

Among borrowers who took out a mortgage in 2012, a whopping 47% did this via a broker! Looks like our message is getting out! Tell your friends. There are options to just going to your bank.

For existing mortgages, 58% are came from a bank and 25% were through a broker. Well nothing really new here. I guess we have to assume the remaining 17% of mortgages were private. Not clear why they didn’t state this fact.

The average mortgage rate dropped… gee, really? You mean more and more people renewed at a lower rate and it dropped the average significantly?

More and more people are locking in the mortgages (from variable to fixed). Seems folks are thinking we’ve pretty much hit bottom in the mortgage rate world. I have to agree. They’ve pretty much only got one direction to move.

Another obvious statement, those renewing this year received a significant reduction in their rates. It’s like they were significantly higher 5 years ago or something.

Only 60% of Canadians have mortgages… and how many of those are close to paying out their mortgage I have to wonder.

Mortgage arrears has fallen to a record low of 0.25%! That is an amazing stat. A super small number of folks are behind in their mortgage. The numbers that actuaries use for lenders is usually somewhere between 1-2%. That’s considered a reasonable expectation.  We get it. Pay that mortgage!

87% of Canadians have more than 25% of equity in their homes. An excellent stat to say that we are very prepared for any significant downturn in the housing market.

And at the very end, a truly meaningful stat that 17% of the deals funding in 2010 COULD NOT BE funded today under the new rules. THAT is a significant number of folks who are not buying their first home. The ripple effect of this 1 stat is enormous.

More stats to come as CMHC just release their fall numbers for housing and rentals.

I’ll try and complete that blog post a little faster. It’s been another busy month.


One response to “State of the Mortgage Market”

  1. walshsurvey says:

    Amazing a .25 arrear rate…. wow. Good post