Highlights from CAAMP’s Annual State of the Residential Mortgage Market

The just-released annual report from CAAMP has verified what many of us already knew – “that four rounds of mortgage rules have contributed to slowing mortgage activity”

On a high note: Among borrowers who took out a new mortgage during 2012, 47% obtained the mortgage from a Canadian bank and 47% from a mortgage broker. Other categories of mortgage professionals accounted for 6% of new mortgages.

Here are the highlights:

  • Fixed rate mortgages have become the most popular and account for 79% of new mortgages. Variable and adjustable rate mortgages have a 10% share; 11% are combination mortgages.
  • Mortgage borrowers voluntarily increased their regular payments by a combined amount of $3.5 billion per year.
  • There are currently about 9.7 million home owners in Canada, 5.95 million have mortgages.
  • An estimated 3.75 million home owners are mortgage-free, although they may have other forms of debt.
  • The average mortgage interest rate for home owners’ mortgages is 3.55%, lower than the average of 3.94% found a year ago.
  • Mortgage rate discounting remains widespread in Canada. During 2012 to the present, the average actual rate for 5-year (fixed rate mortgages) has been 1.85 percentage points lower than typical “posted” rates.
  • For all owners, equity is equal to 70% of the total value of the housing.
  • About 6% of home owners (about 600,000) took equity out of their home in the past year. The average amount is estimated at $49,000.
  • From August to October, the housing sales rate was 7.8% lower than in the year prior to the most recent rule change. Reduced activity at entry levels means that move-up activity will also be gradually impacted, because potential move-up buyers will find it more difficult to sell their current home.

Outlook for the Mortgage Market

“Job creation is the key driver of housing demand in the resale market. In turn, the state of the resale market is the key determinant of housing starts. Expectations for employment and resale housing activity should be similar to recent trends for some time, but housing starts should slow gradually as a result of the prior downshift in resale markets.

Monday, November 19, 2012

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