CAAMP’s Spring Mortgage Report 2012

CAAMP’s Spring Mortgage Report 2012

For mortgage and real estate buffs, CAAMP's semi-annual reports are among the best of the best sources of market stats.

This year's survey seemed to have more data than ever, including insights on the:

  • speed at which borrowers prepay their mortgages 
  • potential effects of a 10% minimum down payment
  • market share of brokers (which is up)
  • ratio of people who miss payments.

As usual, we've distilled the data down to bite-sized nuggets. If you're pressed for time, stats of special importance are highlighted.

If you want to read the report with full context, here is the link: Spring Mortgage Report. A summary follows below (our comments in italics):

Real Estate Market

  • Total value of owner-occupied housing in Canada: $3.48 trillion
  • Households in Canada:  13.7+ million
    • Homeowner households:  9.85 million
    • Renters: 4.1 million

Macro Mortgage Stats

  • Outstanding mortgage principal: $1.15 trillion
  • Homeowner households without mortgages: 3.75 million
  • Households with mortgages: 5.85 million
  • Average mortgage principal outstanding: $170,000
  • Mortgages for purchases in 2011:  $138 billion
  • Total home purchases in 2011:  750,000
  • Purchasers who sold an existing home: 275,000 to 300,000
    (Of those, 175,000 to 200,000 had existing mortgages)
  • Purchasers getting a mortgage in 2011:  600,000 to 625,000 households
    (This includes new mortgages, ports and assumptions)
  • Average mortgage amount on purchases: $224,000
  • Purchases not needing a mortgage: 150,000
  • Homeowners paying off their mortgages in 2011:  200,000
  • 2011 renewals and refinances: 575,000 to 600,000
    (The average principal: $139,000
  • Mortgage credit growth in 2011:  $62 billion
    (This represents owner-occupied principal residences. It's $77 billion if you use the BoC's estimate, which includes investment properties, second properties, and vacant dwellings.)

HELOCs

  • Households with both mortgages and HELOCs: 2 million
    (Average HELOC size:  $58,600
  • Households with a HELOC but no mortgage:  625,000
    (Average HELOC size:  $70,700)

Equity

  • Average equity for homeowners with mortgages but no HELOC: 49%
  • Average equity for homeowners with both mortgages and a HELOC: 41%
  • Average equity for homeowners with a HELOC but no mortgage: 82%
    (Some people keep HELOCs as a backup, and rarely use them.
  • Homeowners with less than 10% equity:  5%  
    (Among homeowners with mortgages, the number is 9%. This can change quickly, of course, depending on home price movements.)
  • Homeowners with 25% or more equity: 83%

Equity Take-Out

  • % of mortgage holders taking out equity in the past year: 18%
  • Average equity take-out: $43,500
  • Total equity take-outs through mortgages:  $29 billion
  • Total equity take-outs through HELOCs:  $16 billion
  • Top uses of equity take-out funds:
    • Renovation:  $17.25 billion
    • Investments:  $10 billion
    • Debt consolidation:  $9.25 billion
    • Purchases, including education:  $7.5 billion
    • "Other" purposes:  $2 billion

Rates

  • Average 5-year fixed discount (2011 to present): 177 bps off posted rates
  • % of borrowers paying rates over 8%:  Less than 1%

Rate Choices

  • % of mortgagors with fixed rates: 65%
  • % of mortgagors with variable or adjustable rates: 29%
  • % of mortgagors with “combination” mortgages: 7%
    (Also called hybrid mortgages, these are part fixed and part variable
  • % of recent renewers who switched from fixed to variable:  12%
  • % of recent renewers who did not change their mortgage rate type: 71%
  • % of the 3.8 million fixed-rate households who locked in during the past 12 months: 14%
    (This is slightly over 500,000 people, says Dunning. One-third [~175,000] purchased their homes recently—during 2008 to 2010. Dunning says this "supports comments by lenders that they have high numbers of new borrowers who start with variable rate mortgages but soon opt for the security of fixed rates.") 
  • % of the 3.8 million fixed-rate households who locked in more than a year ago: 11%
    (~425,000 people
  • # of variable rate holders who are unaware that they have the option to lock in: 100,000
    (To some degree, this is a dereliction of responsibily by their lender or mortgage adviser.

Amortization

  • % of mortgagors with amortization periods over 25 years:  25%
  • % of mortgages closed during 2011 to the present with amortization periods over 25 years:  40%
  • Average original amortization period of homes that were paid off between 2008-2012:  18.4 years
    (The actual amortization period was significantly less: 11.3 years)
  • Average amortization period of homes purchased between 2008 and 2012:  24.1 years
    (The current expected amortization period is less: 19.3 years on average. It's clearly taking longer to pay off pricier homes. Nonetheless, this shows again that initial amortization and actual amortization are two different things.)
  • Average expected amortization of homes purchased during 2008 to present:  22.8 years
    (This is considerably shorter than the original amortization, which averaged 31.9 years. It amounts to about 30% of the original contracted period, says Dunning. Longer amortizations provide "flexibility to manage future uncertainties," he adds, noting that "data on debt service ratios supports this interpretation.")
  • Actual amortization as a ratio of original amortization (for homes paid off since 1990):  two-thirds

Accelerated and Lump-sum Prepayments

  • Mortgage principal repayment (via regular payments) in 2011:  $55 billion
  • Lump-sum prepayments in 2011:  $14 billion 
    (This doesn't include cases where the full mortgage was paid off. Prepayments done to fully repay mortgages totalled $4 billion in 2011. Homeowners with non-extended amortization periods [i.e. 25 years or less] are slightly more likely to increase their regular payments or make lump sum payments.
  • % of mortgage holders who:
    • increased their monthly payments during the past year:  23%
    • increased their monthly payments in prior years:  17%
    • have never increased their monthly payments:  60%
    • have made a lump sum contribution to their mortgage in the past year:  19%
    • made lump sum payments in prior years (but not in the past year): 14%
    • have never made lump sum payments:  67%
    • made lump-sum prepayments and increased their payment (during the past year):  10%
    • have never made any prepayments or payment increases:  50%
  • Average amount of regular payment increase: $400 to $450 per month 
    (This applies to those who voluntarily increased their payments during the past year)
  • # of mortgagors who have voluntarily increased their payments in the past year: 1.35 million
  • Average lump sum repayment: ~$12,500
  • Average extra payments made by mortgagors who purchased recently: ~$250 per month, or $3,000 per year

Use of Mortgage Representatives

  • Ratio of new mortgages in 2011 closed by banks: 50%
    (Up one percentage point from last year
  • Ratio of new mortgages in 2011 closed by brokers: 31% 
    (Up four percentage points from last year
  • Among consumers who took on a new mortgage in 2011:
    • 50% consulted a mortgage representative from a Canadian bank
    • 31% consulted a mortgage broker
    • 12% consulted a mortgage representative from a credit union
    • 5% consulted a mortgage representative from a life insurance or trust company
    • 2% consulted someone else
  • % of consumers who renewed a mortgage through a broker in 2011: 22%
    (As has long been the case, the majority of renewers renew through their lender.

Renters and Down Payments

  • Reasons that tenants gave for opting to rent as opposed to owning:
    • 52% said they have not yet saved the money needed to purchase a home
    • 33% said the cost of homeownership is prohibitive
  • % of renters with $30,000+ available for a down payment:  11%
  • Average funds that renters have available for a down payment: $21,000
  • Among mortgage holders who purchased their homes recently (2007 to the present), if it had it been mandatory to put 10% down to secure a mortgage:
    • 40% said they would have been able to make their purchase
    • 45% stated they would be unable to make the purchase
    • 14% were unsure

      (Dunning estimates that home purchases would drop 100,000 per year if the minimum down payment were 10% instead of 5%. He says that would trigger "less job creation...slower growth of house prices [in fact, prices might fall], reduced consumer confidence..and tighter rental markets with more rapid rates of rent increase."

Forecasts

(These are from 3rd parties, as quoted by CAAMP.)

  • 2012 resale activity:  $168 billion 
    (vs. $166 billion in 2011)
  • 2012 mortgage credit:   $95 billion 
    (up 8.5% versus 2011. The 10-year average growth rate is 9.1%. The primary cause of mortgage growth is completions of new housing, says Dunning.)

Miscellaneous

  • % of borrowers missing one or more payments that they were allowed to miss: 10%
  • % of borrowers missing one or more payments that they were not allowed to miss: 6%
    (This rises to 8% for borrower purchasing between 2007 and 2012)
  • Employment effect of each new single family home built and sold:  2 person years of employment

More on the Survey:  This report was prepared by Will Dunning, Chief Economist of CAAMP, and were based on a survey of 2,000 Canadians. The survey was conducted by Maritz Research Canada between April and May 2012. Forty percent (800 Canadians) were homeowners with mortgages.

This year's survey took tremendous effort—more so than usual because it had more statistics. Our compliments to Will Dunning and Maritz for continuing to collect and intepret such essential data.


Rob McLister, CMT

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