MORTGAGE FACTS 2012

Real Estate Market

13.8 million: The number of households in Canada
9.7 million: The number of homeowner households in Canada
4.1 million: The number of renters in Canada
Mortgage Market

5.95 million: The number of homeowners with mortgages. Of these:
2.10 million also have HELOCs
3.85 million have a mortgage but no HELOC
3.75 million: The number of homeowners who are mortgage-free (27%)
Of these, 600,000 have HELOCS
2.1 million: The number of homeowners who owe money on a HELOC
600,000: The number of homeowners with an approved HELOC but no balance owing
3.15 million: The number of homeowners with neither a mortgage nor a HELOC
230,000 to 265,000: Number of Canadian homeowners who will have fully repaid their mortgages this year
9%: Average annual rate of growth of the residential mortgage market during the past decade
6.7%: The current rate of growth of the mortgage market

Mortgage Type

79%: Percentage of new mortgages on homes purchased in 2012 that were fixed rate mortgages
The typical share of fixed rate mortgages in previous years was two thirds

The Bank of Canada pegs the share of fixed-rate mortgages at 90%. That is year-to-date, for all mortgages at federally regulated institutions, not just purchases. That compares to 55% on average in 2010 and 2011.
10%: Percentage of new mortgages on homes purchased in 2012 that were floating-rate mortgages
11%: Percentage of new 2012 mortgages that were hybrid mortgages
Hybrid mortgages generally refer to mortgages that are part fixed and part variable. They're getting a bit more popular, up from a share of 8% last year.

Professionals consulted when obtaining current mortgages

"New mortgages" are just that, newly formed. They do not refer to mortgages that have been renewed, renegotiated, or transferred.

47%: of borrowers in 2012 obtained their new mortgage from a bank
70%: of renewals in 2012 were obtained from a bank
This number is conspicuously low. Lenders are going out of their way to reach existing customers before brokers do. Some lenders are offering early renewals (without penalty) six months before a client's maturity date.

Amortizations

68%: Share of mortgages on homes bought in 2012 that have an amortization of 25 years or less
In the 2011 fall survey, ~78% had amortizations of 25 years or less
32%: Percentage of homeowners who currently have extended amortizations
It's important to remember that initial amortization and actual amortization are two different things. Mortgages repaid during the last 20 years had, on average, an actual repayment period that was two-thirds of the original amortization. For some people, it is advisable to extend their amortization as long as possible. That frees up their cash for other productive purposes. Prepayments can then be used any time to reduce their amortization considerably.

32%: Percentage of mortgage borrowers in 2012 who have taken one or more of these actions to reduce their amortization: increased regular payments; made lump-sum prepayments; and/or increased the frequency of their payments
Lump Sum and Accelerated Payments

$3.5 billion: The amount that regular payments were increased voluntarily in the past year (on top of voluntary increases that are being carried forward from previous years)
$20 billion: The total estimated amount of lump sum prepayments made in the past year
$6 billion: The total estimated amount of lump-sum payments made at the time people paid off their mortgages (over the past year)
25%: Percentage of those who renewed their mortgages in 2011 or 2012 and then voluntarily increased their payment
If you renew at a lower rate, try to maintain the same payment you had before, or save/invest the difference.

15%: Percentage of homeowners who made a lump sum prepayment in the past year. This compares to:
18% in 2011
12% in 2010
Based on average lump-sum prepayments, 15% lump-sum prepayment privileges remain sufficient for most borrowers. One exception is when there's a decent probability you'll break your mortgage early. In that case, 20-25% prepayments can potentially reduce your penalty cost. This assumes: [a] you can make those prepayments before discharging your mortgage, or [b] your lender will automatically apply your prepayment privileges to reduce your penalty—in cases where you're refinancing with that same lender.

6%: Percentage who have increased their payment frequency (e.g., gone from monthly payments to accelerated bi-weekly or weekly payments)
1.9 million: Number of households who made additional payment efforts in the past year (on top of their required payments)
875,000: Number of homeowners who made lump-sum prepayments in the last year
$22,500: The average lump-sum prepayment made by these 875,000 people
$29,000: The average lump sum payment made by the nearly 200,000 who paid off their mortgages in the past year
Interest Rates

3.55%: The average mortgage interest rate
3.94%: The average mortgage interest rate one year ago
3.26%: The average mortgage rate for mortgages on homes bought in 2012
3.24%: The average mortgage rate for mortgages that were recently renewed
5.28%: The average posted rate for a five-year term in 2012
It's amazing how little posted rates have moved this year. In fact, it's virtually unprecedented.

1.85 points: The average discount off posted rate for a 5-year fixed rate mortgage
Last year it was 1.46 percentage points, largely because lenders have refused to lower posted rates this year, despite record low bond yields.

1.25 percentage points: The minimum discount off posted rate for five-year fixed mortgages
If you're not getting at least this much discount, you're probably either a really unmotivated negotiator or you're not reasonably qualified. Most lenders are putting more competitive rates on their renewal letters nowadays, but those rates are still excessive compared to the best rates on the street. Some lenders choose not to put any rates on their renewal letters, preferring to speak to the client directly.

Equity

70%: The average equity ratio for all homeowners
51%: The average equity ratio for owners with mortgages but not Home Equity Lines of Credit (HELOCs)
57%: The average equity ratio for owners with both mortgages and HELOCs
78%: The average equity ratio for owners with HELOCS but without mortgages
3%: Percentage of homeowners with an equity ratio of less than 10%
5%: Percentage of homeowners with a mortgage (with or without a HELOC) who have less than 10% equity
87%: Percentage of Canadian homeowners with 25% or more equity (7 out of 8)
This includes people without mortgages.

78%: Percentage of homeowners with mortgages (with or without a HELOC) who have 25% equity or more
Equity Take-Out

$440,000: The average value of a home in cases where a borrower took out equity (over the past year)
$49,000: The average equity take-out amount
These households extracted an average of 11% equity from their home
6%: Percentage of homeowners (600,000) who took equity out of their home in the past year
The number was 580,000 in last year's (2011) survey and 1.02 million the year before (2010).

$30 billion: The estimated amount of total equity take-out in the past year
$8.25 billion: Amount used for home renovations (28% of borrowers who took out equity used the funds, in full or in part, for this purpose)
$7.50 billion: Amount used for debt consolidation and repayment (25% of respondents cited this as a purpose)
$6.50 billion: Amount used for purchases including education (22% of respondents cited this as a purpose)
$5.25 billion: Amount used for investments (18% of respondents cited this as a purpose)
$2.50 billion: Amount used for “other” purposes (8% of respondents cited this as a purpose)
Mortgage rule changes

55%: Percentage of home purchases that require high-ratio mortgages
16.9%: Percentage of high-ratio mortgages that were funded in 2010 that could not have been approved under the new mortgage rules
$25,000: The average additional down payment required for the above affected buyers to become re-qualified (Conversely, home prices could drop by a roughly similar amount and have the same effect.)
9%: The amount that ongoing home sales could be reduced if the 16.9% of potential high ratio buyers are removed from the market
The report notes that among the impacts of these new rules changes, “...vacancy rates in the rental housing sector will ultimately be lower than they need to be and rent increases will be more rapid than would otherwise occur.” Every mortgage insurance policy-maker should have seen this side effect coming.

Variable vs. Fixed Rates

170 basis points: The average spread between rates for variable rate mortgages and the 5-year fixed rate mortgage in 2010 and 2011, according Dunning.
Today that number is ~39 bps, about the lowest we have on record.

125,000: Number of borrowers who switched from variable rate to a fixed rate when they renewed in 2012 (50,000 switched from a fixed rate to a variable rate)
13% (500,000): Percentage of Canada’s 3.85 million homeowners with fixed rate mortgages who locked in during the last 12 months
12% (475,000) locked in more than a year ago
3 out of 4: The ratio of this year's renewers who had a reduction in their interest rate
Among the other 1/4, some likely renewed from shorter terms (so their rates rose), some renewed into different mortgage types or longer (higher cost) terms, some renewed into non-prime mortgages and some simply got an uncompetitive rate.

Feelings About Mortgages

69%: Percentage of respondents who agreed that their current mortgage is, “The best I could have gotten at that time (e.g. best rates and terms, comfort with lender, etc.)”
It's not trivial that 3 in 10 have regrets about their mortgage. These folks are more prone to be up for grabs at renewal.

24%: Percentage who agreed that their current mortgage is “good, but there are probably better ones out there for me”
If you've got an average size mortgage, that's a big commitment. If you're not confident in the mortgage your lender or broker has recommended, don't settle. Phone another broker for a second opinion. It could be a money-saving call.

8%: Percentage who agreed that their current mortgage is "ok, but I definitely could have done better”
2%: Percentage of respondents who said their current mortgage is "a bad deal and I should have been able to do better”
78%: Percentage of homeowners who have taken on a new mortgage or renewed a mortgage in 2012 agreed that their mortgage is, “The best I could have gotten at that time”
Two things may be happening here: (a) Rates are getting more competitive, and (b) more people can access better information to help judge the quality of their deal.

14%: Percentage of homeowners who don't require a mortgage (out of buyers who purchased in 2012)