November 23, 2012
I have a confession to make: I’m a sucker for numbers. Yes, I belong to that “exciting” bunch who in eager anticipation, drools at the latest economic announcements, interest rate figures or housing forecasts.
Therefore, it came as no surprise to colleagues at the office when CAAMP (Canadian Association of Accredited Mortgage Professionals) announced the results of their survey (Annual State of the Residential Mortgage Market in Canada) that Stevie was in numbers heaven!
Ever wondered how many of your friends or neighbors choose a variable rate mortgage versus let’s say a fixed or hybrid mortgage?
What about the state of mortgage arrears in Canada? Or, how many people actually tap their equity and what do they spend the money on? It’s all here! I’ve diced up the report into a few quick points. A link to the complete survey results is available at the end for your reading pleasure. Enjoy!
“Fixed rate mortgages are most popular with people in the youngest age bracket.”
Mortgage Type 18-34 35-54 55 + Total Fixed-rate 70% 63% 64% 65% Variable or adjustable-rate 22% 30% 30% 28% Combination 8% 7% 6% 7% All Types 100% 100% 100% 100%
– Approximately 65% of mortgage holders (3.85 million out of 5.95 million) have fixed rate mortgages.
– 28% (about 1.7 million) have variable and adjustable rate mortgages
– 7% (about 400,000) have “combination” mortgages, in which part of the payment is based on a fixed rate and part is based on a variable rate.
– The average mortgage interest rate for home owners’ mortgages is 3.55%, lower than the average of 3.94% found a year ago.
– Looking further, for borrowers who have recently renewed a mortgage, the average interest rate is now lower (by 0.65 percentage point) than the rates prior to renewal.
– Among borrowers who renewed, 61% (about 375,000) saw their interest rate fall, 14% (100,000) saw increases, and 25% (150,000) had no change.
“Percentages of Mortgages by Type, For New Purchase Mortgages and Recent Renewals”
Mortgage Type Purchase During 2012 Renewal or Refinance During 2012 All Mortgages Fixed-rate 79% 67% 65% Variable or Adjustable Rate 10% 26% 28% Combination 11% 7% 7% All Types 100% 100% 100%
“Locking-in Mortgage Rates”
– The survey found that there has been a considerable amount of “locking-in” (converting from variable rate to fixed rate mortgages).
– Among the 3.85 million Canadian home owners with fixed rate mortgages, 13% locked in during the past 12 months (about 500,000) and 12% locked in more than a year ago (about 475,000).
Mortgage holders were asked “In the past year, did you accelerate your mortgage payments?” Three options were offered: (a) increasing regular payments (b) making lump sum payment and (c.) increasing payment frequency, as well as a fourth option: “none of these”.
“Very few mortgage borrowers have taken advantage of these options which work to shorten the repayment timeline on their mortgages”
– Out of about 5.95 million mortgage holders in Canada, about 1.9 million have made additional payment efforts during the past year.
– 16% of mortgage holders have voluntarily increased their monthly payments during the past year.
– 15% have made a lump sum contribution to their mortgage in the past year.
– Relatively few mortgage holders (6%) have increased their payment frequency.
“Among borrowers who took out a new mortgage during 2012, 47% obtained the mortgage from a Canadian bank and 47% from a Mortgage Broker. Other categories of mortgage professionals accounted for 6% of new mortgages.”
– About 6% of home owners (about 600,000) took equity out of their home in the past year.
– The average amount is estimated at $49,000. These results imply that the total amount of equity take-out during the past year has been $30 billion.
– The most common uses for the funds from equity take-out are renovation (estimated at $8.25 billion), followed by $7.5 billion for debt consolidation and repayment, $6.5 billion for purchases (including education), $5.25 billion for investments, and $2.5 billion for “other” purposes.
– The most recent rate (0.33% as of August) has fallen for 19 consecutive months and is approaching the record low of about 0.25% seen prior to the recession. The current rate is not worrisome.
– In the Canadian context, most mortgage defaults are due to reduced ability to pay, especially including job loss, but also income reductions due to reduced hours or reduced hourly pay rates. Marital breakdown is also a cause of financial difficulty.