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 response to the newest client 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 response to the affiliation’s Semi-Annual State of the Housing Market Report.

Moreover, 70% of Canadians expressed concern about their household’s monetary scenario 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,” stated 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 owners. We stay dedicated to advocating for measures that may make homeownership extra accessible and sustainable for Canadians.”

The priority extends past present owners. 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 client survey outcomes are primarily based on a sampling of practically 2,000 Canadians and was carried out by Bond Model Loyalty earlier this yr.

Client 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 scenario 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 predicted to be the primary of a number of charge cuts this yr.

Of these renewing within the subsequent 12 months, greater than half (52%) are optimistic in regards to the economic 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 charge setting, roughly 80% of respondents proceed to see actual property as a great 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 choice to turn out to be owners.

“Regardless of the present challenges, Canadians’ confidence in actual property as a sound long-term funding stays sturdy,” stated 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 patrons (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 in the case of future intentions, 62% of respondents stated they’re considerably or very prone to work with a mortgage dealer.

The mortgage market

Mortgage sorts

• 70% of mortgage holders had fixed-rate mortgages in 2023 (+1 pt. from 2022)
  • 12% stated they locked in from a variable charge inside the previous 12 months
• 23% of mortgages have variable or adjustable charges (-2 pts.)
  • 28% of variable-rate debtors stated that they had thought of locking in a hard and fast charge however determined to not
• 3% of debtors have a mixture of mounted and variable, generally 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 fee (-1 pt. from 2022)
• $70,578: The typical down fee made by all patrons final yr (-$1,614 from 2022)

The highest sources of down fee funds for all patrons on their first buy:

• 58%: Private financial savings (+2 pts.)
• 8%: Items from mother and father or different relations (-3 pts.)
• 4%: Mortgage from mother and father 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 stated they merely accepted the preliminary charge supplied to them by their lender throughout their final renewal (+3 pts. from final yr)
• Solely 8% of respondents stated they “considerably” negotiated their charge (-8 pts.)

Refinancing

• 69% of Canadians haven’t thought of refinancing their mortgage (-6 pts. from final yr)
• 5% have refinanced their mortgage prior to now yr
  • Canadians beneath 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 similar 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 typical penalty paid when refinancing a mortgage (down from $5,173 a yr in the past)

Fairness Takeout

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

Most typical makes use of for the funds embody:

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

Actions to speed up mortgage reimbursement

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

Use of mortgage professionals

Dealer share

• 34% of mortgage debtors used the companies of a mortgage dealer after they obtained their mortgage (+5 pts. year-over-year)
  • 46% of first-time patrons 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 companies of a financial institution (-6 pts.)

Mortgage skilled outreach

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

Explanation why customers hesitated to work with a dealer

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

Dealer clients report greater satisfaction in comparison with financial institution purchasers

• 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 customized service
• 27%: Degree of contact post-transaction