Unique: 76% of mortgage holders are anxious about their upcoming renewal: MPC survey

Rising monetary nervousness is affecting each Canadian mortgage holders and non-owners alike, in line with the most recent shopper survey from Mortgage Professionals Canada.

Of mortgage holders going through renewal within the coming 12 months, 76% say they’re anxious in regards to the course of, marking a ten proportion level improve from final yr, in line with the affiliation’s Semi-Annual State of the Housing Market Report.

Moreover, 70% of Canadians expressed concern about their household’s monetary state of affairs within the coming months, up seven proportion factors from final yr.

“Canadians are grappling with an unprecedented housing affordability disaster, exacerbated by ongoing excessive rates of interest and financial uncertainty,” mentioned Lauren van den Berg, President and CEO of MPC. “Our findings spotlight the pressing want for insurance policies that deal with these challenges and help each present and aspiring householders. We stay dedicated to advocating for measures that may make homeownership extra accessible and sustainable for Canadians.”

The priority extends past present householders. Greater than half (51%) of non-owners now consider they are going to by no means buy a house, a pointy improve from 18% two years in the past. In the meantime, simply 16% of non-owners say they’re planning to purchase a principal residence inside the subsequent 24 months, down seven factors from final yr.

MPC’s semi-annual shopper survey outcomes are based mostly on a sampling of almost 2,000 Canadians and was performed by Bond Model Loyalty earlier this yr.

Shopper sentiment could also be turning a tide

Regardless of heightened near-term nervousness attributable to renewals at greater rates of interest and financial uncertainty, Canadians largely consider the present financial state of affairs will begin to enhance over the approaching yr.

That optimism is prone to develop additional now that the Financial institution of Canada has delivered what is anticipated to be the primary of a number of fee cuts this yr.

Of these renewing within the subsequent 12 months, greater than half (52%) are optimistic in regards to the financial system within the coming yr, up two factors from the earlier yr. Though, that’s nonetheless down 18 factors from pre-pandemic norms.

And regardless of the present high-interest fee setting, roughly 80% of respondents proceed to see actual property as long-term funding, a seven-point improve from final yr.

Moreover, 77% classify a mortgage as “good debt,” up from 68% final yr, and greater than 9 in 10 say they’re proud of their determination to change into householders.

“Regardless of the present challenges, Canadians’ confidence in actual property as a sound long-term funding stays robust,” mentioned Joe Jacobs, Chair of MPC’s board of administrators. “This enduring perception underscores the significance of working with a mortgage skilled.”

Dealer market share continues to rise

And that’s precisely what extra Canadians are doing, with the survey confirming a rising share of debtors turning to mortgage brokers for his or her residence financing wants.

Greater than a 3rd (34%) of homebuyers used a mortgage dealer for his or her most up-to-date mortgage, up 4 factors from final yr.

Mortgage dealer share is even greater amongst first-time consumers (46%) and people who bought prior to now two years (45%). Regionally, these in Ontario (40%; +10 pts.) and Quebec (40%; +6 pts.) are most certainly to work with a dealer.

And with regards to future intentions, 62% of respondents mentioned they’re considerably or very prone to work with a mortgage dealer.

The mortgage market

Mortgage varieties

• 70% of mortgage holders had fixed-rate mortgages in 2023 (+1 pt. from 2022)
  • 12% mentioned they locked in from a variable fee inside the previous 12 months
• 23% of mortgages have variable or adjustable charges (-2 pts.)
  • 28% of variable-rate debtors mentioned that they had thought-about locking in a set fee however determined to not
• 3% of debtors have a mixture of mounted and variable, often known as “hybrid” mortgages (unchanged)

Mortgage phrases

• 57% of mortgage holders have a 5-year time period
• 10% have a 3-year time period
• 6% have a 4-year time period
• 4% have a 2-year time period

Down Funds

• 60%: Those that wouldn’t have been capable of afford their residence with out help with their down cost (-1 pt. from 2022)
• $70,578: The common down cost made by all consumers final yr (-$1,614 from 2022)

The highest sources of down cost funds for all consumers on their first buy:

• 58%: Private financial savings (+2 pts.)
• 8%: Presents from dad and mom or different relations (-3 pts.)
• 4%: Mortgage from dad and mom or different relations (unchanged)
• 7%: Withdrawal from RRSP (-1 pt.)
• 2%: Different sources (-1 pt.)

Renewals

• 70% of mortgage holders count on to resume their mortgage inside the subsequent three years
  • 23% count on to resume this subsequent yr
  • 27% count on to resume inside the subsequent two years

Negotiation

• 44% of mortgage holders mentioned they merely accepted the preliminary fee supplied to them by their lender throughout their final renewal (+3 pts. from final yr)
• Solely 8% of respondents mentioned they “considerably” negotiated their fee (-8 pts.)

Refinancing

• 69% of Canadians haven’t thought-about refinancing their mortgage (-6 pts. from final yr)
• 5% have refinanced their mortgage prior to now yr
  • Canadians underneath the age of 34 have already refinanced twice as a lot as these aged 35-54
  • 52% of those that have refinanced their mortgage used the identical dealer who assisted with their buy and 26% switched brokers
  • 67% remained with their identical lender (-7 pts. from 2022) and 15% switched lenders. (-1 pt.)
• 9% of those that refinanced have paid a penalty (-1 pt.)
• $3,511 is the common penalty paid when refinancing a mortgage (down from $5,173 a yr in the past)

Fairness Takeout

• By refinancing
  • 16%: Proportion of householders who took fairness out of their residence prior to now yr by way of refinancing (+2 pts.)
  • $92,838: The common quantity of fairness taken out by way of refinancing (+$32,428 from 2022)
• Utilizing a house fairness line of credit score (HELOC)
  • 9%: Proportion of householders who took fairness out of their residence prior to now yr by way of their HELOC (+1 pt.)
  • $37,495: The common quantity borrowed from their HELOC (-$4,165 from 2022)

Most typical makes use of for the funds embrace:

• 34%: For residence renovation and restore (-2 pts. year-over-year)
• 33%: For debt consolidation and compensation (+1 pt.)
• 23%: For purchases (no change)
• 15%: For investments (-6 pts.)
• 8%: To reward or lend to relations (-1 pt.)

Actions to speed up mortgage compensation

• 40% of mortgage holders took motion to shorten their amortization durations (-5 pts.)
  • 16% made a lump-sum cost (-3 pts.)
    • The common lump-sum prepayment was $22,962 (+$1,460)
  • 15% elevated the quantity of their cost (-3 pts.)
    • The common voluntary month-to-month cost improve was $699 (+$88)

Use of mortgage professionals

Dealer share

• 34% of mortgage debtors used the providers of a mortgage dealer once they obtained their mortgage (+5 pts. year-over-year)
  • 46% of first-time consumers used a mortgage dealer (+1 pt.)
  • 45% of those that bought inside the final two years (+5 pts.)
  • 40% of these in Ontario (+10 pts.)
  • 40% of these in Quebec (+6 pts.)
  • 38% of these aged 35-54 (+8 pts)
  • 37% of these aged 18-34 (+4 pts.)
• 54% of mortgage debtors used the providers of a financial institution (-6 pts.)

Mortgage skilled outreach

• 1.9: The common variety of mortgage professionals shoppers consulted with when acquiring their present mortgage
• 2.3: The common variety of quotes they acquired

The explanation why shoppers hesitated to work with a dealer

• 27% mentioned they didn’t need to pay for a dealer’s providers (unveiling a data hole about how mortgage brokers are compensated, which is often by way of a fee paid by the lender)
• 17% mentioned they didn’t suppose a dealer may get them a greater deal
• 13% mentioned they didn’t perceive how brokers are compensated
• 11% mentioned they don’t belief brokers or the method of working with a dealer

Dealer prospects report greater satisfaction in comparison with financial institution shoppers

• 38%: Ease of doing enterprise
• 37%: Reliability
• 37%: frequency of contact throughout mortgage course of
• 37%: Data and understanding of mortgage merchandise and charges
• 36%: Providing aggressive mortgage charges
• 33%: Offering personalised service
• 27%: Stage of contact post-transaction