Annual State of the Residential Mortgage Market in Canada
Following are highlights from the 2013 CAAMP report.
A copy of the full report is available to download at www.caamp.org
For homes purchased in 2013, 82 per cent had fixed rate mortgages. Overall, 66 per
cent of homeowners have fixed rate mortgages, 26 per cent variable rate mortgages and
8 per cent combination mortgages.
***This has been largely due to the 5yr fixed rate dipping as low as 2.79% this Spring while variable rate mortgages hovered at a net rate of 2.80% themselves. The risk of the higher penalties in a fixed rate product were, for most clients, outweighed by certainty of such a low rate over a 5yr period.
However, with todays 5yr fixed rate at 3.39% – 3.49% and the variable as low as 2.50% net, the shift towards variable rate product has been significant & justified.
For homes purchased in 2013, 84 per cent have amortizations of 25 years or less.
Overall 81 per cent have amortizations of 25 years or less.
***This is reflective of many more mortgages being CMHC insured than in years gone by, including mortgages with 20% or greater down payments that demonstrate other ‘risks’ such as location, self employed applicants, etc.
40 per cent of all new mortgages in 2013 were obtained through a mortgage broker,
while 42 per cent were obtained from a bank. Overall mortgage broker share has
increased from 25 per cent to 28 per cent since last year.
For mortgages that have been paid off in the last two decades, repayment periods have
been 30 per cent shorter than the original contracted period.
***A key statistic which clearly supports 30, 35, & 40 year amortizations as an excellent tool for young families starting out. The first few years of lower payments allow for student loan repayment, furnishing of first homes, daycare expenses in the early years, and lower salaries at the start of a career.
The evidence clearly shows that as earnings grow and other expenses decrease, a serious focus is placed on accelerating the pay-down of mortgage debt.
The longer amortization helps Canadians get into the market sooner, but they do not stay in debt significantly longer overall.
During 2013, the average discount on a five-year fixed rate mortgage was 2.13 points –
the average mortgage is 3.06 per cent, compared to the average posted rate of 5.21 per
For borrowers renewing their mortgage in the next six months, 96 per cent will see a
lower rate. For borrowers who renewed their mortgage in 2013, 64 per cent saw a lower
***I suppose the bubbly-bubble crowd will have to wait another 5yrs…or longer. Many homeowners will enjoy another 5 years of locked in low rates, making a significant reduction in the mortgage amount, and thus a significant reduction on the exposure come renewal depending on where rates are at.
On average, home equity in Canada is 66 per cent of the value of a home, compared to
less than 50 per cent in the US, and 83 per cent of Canadian homeowners have at least
25 per cent equity in their home.
***A notable difference in the cushion we have over our neighbours to the South.
Mortgage credit has slowed from an average of 8.6 per cent in the last decade to 4.5 per
cent for 2013 and is projected to be even lower at 3.25 per cent in 2014.
Among those who purchased homes in 2013, 57 per cent were first time buyers.
During 2013, 38 per cent of borrowers took steps to accelerate their repayment period,
including increasing their payment amount, making a lump sum payment or increasing
their payment frequency.
Overall, 80 per cent of those surveyed say mortgage credit is good debt, 84 per cent say
that real estate is a good investment and 80 per cent expressed positive feelings of
confidence and security toward their mortgages and home ownership in general.
***Clearly a high level of comfort and confidence among those in the market, which in turn translates into acts of confidence that will ripple through the economy further supporting the sentiment.