Winnipeg Mortgage Brokers Explain the State of the Residential Mortgage Market

Despite the headwinds of a global pandemic, Canadians’ interest in real estate and the resulting rise in prices took even the most seasoned experts by surprise.

This, of course, had major implications for the mortgage market.

Mortgage Professionals Canada’s Annual State of the Residential Mortgage Market in Canada report provided a detailed look at borrower behaviour and mortgage market trends in 2020. The comprehensive report, complied by MPC’s chief economist Will Dunning, looked at everything from average mortgage rates and sources of down payment to equity takeout and mortgage preferences.

“In a normal year, about 4.5% to 5% of Canadians buy a new or existing home,” Dunning said in a release, adding that percentage could rise to 5.5% to 6% this year.

“…in proportional terms, this is a very large increase, and it is overwhelming the available supply,” he continued. “It is possible, but far from certain, that this could continue for some time – that a small rise in the percentage of Canadians who buy homes could result in sustained, very strong demand.”

We took a deep dive into the report and have extracted some of the most relevant findings by category below…

The Mortgage Market:

- 73% - Percentage of mortgage holders with fixed-rate mortgages in 2020
  - Down from 74% in 2019
- For mortgages on homes purchased specifically in 2020, fixed-rate mortgages were chosen 77% of the time (down from 85% of 2019 purchases)

- 22% - Percentage of mortgages that have variable or adjustable rates
  - Down from 21% in 2019
- For mortgages taken out in 2020, 18% had variable rates (up from 12% of 2019 purchases)

- 5% - Percentage of mortgages that are a combination of fixed and variable, known as “hybrid” mortgages (unchanged from 2019)
- “Early in the pandemic period, the Bank of Canada established an expectation that short-term interest rates will remain extremely low for some time. This made variable rates seem less risky. Still, a large majority of active borrowers chose the security of a fixed rate at the extremely low interest rates that were available during the year,” Dunning wrote.

Actions that Accelerate Repayment:

- ~33% - Percentage of mortgage holders who voluntarily take action to shorten their amortization periods (up marginally from 32% in 2019)
- Among all mortgage holders:
  - 17% made a lump-sum payment (the average payment was $26,700 – up from $19,100 a year earlier)
  - 15% increased the amount of their payment (The average amount was $470 more a month, compared to $370 in 2019)
  - 6% increased payment frequency

Mortgage Sources – Mortgage Broker:

31% - Percentage of overall outstanding mortgages that were arranged by a mortgage broker
This rises to 40% for mortgages obtained in 2020

Interest Rates:

- 2.60% - The average mortgage interest rate in Canada in 2020
  - Down from the 3.14% average reported in 2019
- 2.32% - The average mortgage rate on homes purchased in 2020
  - Fixed rates averaged 2.37% and variables averaged 1.93%
- 2.29% - The average rate for mortgages renewed in 2020
- 2.36% for fixed mortgages and 1.92% for variables
- 84% - The percentage of those who renewed a mortgage in 2020 who saw their mortgage rate decrease (9% saw their rate increase)
- $245,000 – The average remaining principal for renewals in 2020
- 2.25% - The average actual (discounted) rate for a 5-year fixed mortgage in 2020, more than two percentage points lower than the posted rate, which averaged 4.95%

Sources of Down Payments:

- 21% - The average down payment made by first-time buyers in recent years, as a percentage of home price
- The top sources for these down payment funds for all first-time buyers:
  - 84% - Personal savings
  - 25% - Gifts from parents or other family members (vs. 28% for purchases made over the last three years)
  - 30% - Loan from a financial institution
  - 26% - Withdrawal from RRSP
  - 14% - Loan from parents or other family members

Consumer Sentiment:

- 90% - The percentage of homeowners who are happy with their decision to buy a home


Source: Canadian Mortgage Trends – Steve Huebl


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