Report breaks down Canadian mortgage market

Every fall the Canadian Association of Accredited Mortgage Professionals releases a report on the state of the residential mortgage market in Canada. In it you’ll read that amortizations are decreasing, rate discounts are increasing and Canadians have flocked to the fixed rate.

The following are some highlights from the report:

– 8% of Canadians believe there will be a housing bubble burst in the next five years (shows strong consumer confidence, strange though with all of the media outlets scaring us of a bubble).

– 82% of new mortgages were fixed rate mortgages – for homes purchased in 2013. As of late though, variable rate spreads have made it a little bit more attractive to accept a variable vs. fixed.

– 2% of buyers with less than 20% down payment who chose a variable or adjustable rate mortgage. Estimates show that this has to do with new qualifying rules affecting this low figure.

– 16% of mortgages had amortizations over 25 years versus 34% for homes purchased between 2008-2010. This likely has to do with government rule changes more than any other factor. To add to this, mortgages are being repaid (vs. their original amortization) at a rate of 30% faster than any time in the past two decades, meaning Canadians are taking advantage of their prepayment privileges.

– 2.15% is the average discount from posted rates for the five-year fixed rate mortgage, while 86% of borrowers with less than 20% down chose a fixed rate mortgage.

– 40% of Canadians chose their new mortgage through the mortgage brokerage channel.

– 42% of new mortgages were obtained through the banks, while the remaining would come directly from credit unions and other non-bank lenders.

– 70% of Canadians have more than 25% equity.

– 57% of buyers in 2013 have been first-time buyers, approximately 250,000 so far this year. This figure is much higher than normal as targets for this category are in the 40% range.

– There are 9.52 million home owners in Canada and 5.58 million of them have mortgages with 3.94 million of them being mortgage-free. The home ownership figures are up 200,000 over 2012.

This is a summary of the report that was produced by Will Dunning, chief economist of CAAMP. For full details of the report, visit www.CAAMP.ca.

Jean-Guy Turcotte is a Red Deer Mortgage Broker at Dominion Lending Centres – Regional Mortgage Group.

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