Nearly half of non-homeowners in Canada think they’ll never be able to purchase a home, according to new survey results from Mortgage Professionals Canada (MPC).
That figure is up by 15 percentage points from just six months earlier, highlighting the ongoing affordability crisis with both home prices near their all-time peak and interest rates at multi-decade highs.
Meanwhile, just 17% of non-owners say they are planning to purchase a primary residence in the next 24 months, a drop of five percentage points from six months ago, according to MPC’s latest Semi-Annual State of the Housing Market report.
“Canadians are facing a housing affordability crisis with little sign of easing in sight,” said Lauren van den Berg, President and CEO of MPC. “We hear this every day from our members right across the country, and that is why we continue to advocate for policies that break down the barriers to homeownership.”
The survey results also show that the current rate environment is having an impact on existing homeowners. There’s been a tripling in the percentage of current owners who are considering selling their home because they can no longer afford their current mortgage.
Overall, 64% of homeowners say rising rates are having a material impact on their financial situation, with nearly a third saying they are worried about missing a payment, needing to sell or having to make a significant life change to stay in their home.
The level of concern is heightened among first-time buyers, with 72% saying they are concerned and 7% thinking they will be forced to sell.
Renewals are another point of stress for many borrowers, especially since 65% expect to renew their mortgage over the next three years. More than two thirds (69%), say they are anxious about their renewal, an increase from 63% just six months ago.
Insight into the mortgage market
The report provided a wealth of insight into other topics, such as mortgage product preferences, mortgage broker share and client loyalty.
Mortgage broker share rose two points compared to last year, with 31% of respondents saying they used the services of a mortgage broker. That percentage rises to 38% who said they would choose a broker if they were looking for a mortgage today.
In terms of mortgage products, fixed rates once again dominate consumer preference, with nearly three quarters (72%) of outstanding mortgages now with a fixed rate. Among new originations as of May, just over 7% of borrowers chose a variable rate.
Borrowers are also increasingly gravitating towards shorter terms, with one in five borrowers (21%) opting for a term of one to three years on the expectation that rates will start to fall.
Five-year terms, however, remain the most popular term length, representing 61% of mortgages taken out in the past two years.
Survey highlights: The mortgage market
Mortgage Types
- 72% of mortgage holders had a fixed-rate mortgage as of mid-2023
- 23% of mortgage holders had a variable rate
- For new mortgage originations as of May, just 7.4% took a variable rate, down from the peak share of 57% in January 2022
- 3% of borrowers have a hybrid (half-fixed, half-variable) mortgage
Variable-rate mortgages
- 60% of variable-rate holders report having an adjustable-rate mortgage, that is, one where the payments fluctuate as prime rate rises or falls.
- The other 40% have fixed-payment variable-rate mortgages, where the monthly payment remains constant, but as rates rise less of the monthly payment goes towards principal repayment and a greater portion goes towards interest costs.
- 40% of variable-rate borrowers plan to lock in to a fixed rate.
- Another 29% say they are considering switching to a fixed rate.
- And a quarter (27%) said they won’t consider switching to a fixed rate.
Mortgage terms
- Among mortgages taken out in the last two years:
- 61% had a term of 5 years
- 14% had a 3-year term
- 6% had a 2-year term
- 7% had a 4-year term
- Reasons for choosing a shorter term included:
- 61% expect rates to fall
- 39% simply opted for a term with a lower rate
- First-time buyers (25%) are choosing shorter terms (1 to 3 years) more often than non-first-time buyers (15%)
Mortgage prepayments
- 39%: Percentage of mortgage holders who voluntarily take action to shorten their amortization periods (down from 45% in 2022)
- Those in Ontario (36%) and B.C. (35%) are most likely to be paying more than the required amount on their mortgage
- Mortgage broker clients are more familiar with the prepayment options available to them compared to bank clients (66% vs. 61%)
- Among prepayment actions taken:
- 30% made a lump-sum payment (up from 19% last year)
- The average lump-sum payment: $21,502
- 37% increased the amount of their payment (up from 18%)
- The average payment increase: 611 per month (up from $583 a month, last year)
- 33% increased their payment amount and made a lump sum payment
- 30% made a lump-sum payment (up from 19% last year)
Renewals
- 65% of mortgage holders expect to renew their mortgage within the next three years
- Of those:
- 9% expect to renew in the next 6 months
- 10% expect to renew their mortgage within the next 6 to 12 months
- Of those:
- 69% say they are anxious about their renewal (up from 63% six months ago)
- 78% for first-time borrowers
- 87% for new-to-Canada borrowers
- 78% of mortgage broker clients say their plan to use the same mortgage professional for their upcoming renewal
- 80% of respondents plan to remain with their current mortgage lender
Mortgage penalties
- 11% of borrowers paid a penalty to break their most recent mortgage
- 80% said they did not pay a penalty and 9% said they don’t know
- 49% of those who paid a penalty said they discussed it with their mortgage professional
- 33% said they didn’t discuss it and 18% don’t know
Broker share
- 31% of mortgage borrowers used the services of a mortgage broker when they obtained their mortgage
- Up two points from last year
- First-time buyers (42%) are most likely to use the services of a mortgage broker, as well as those between the ages of 18 and 42 (41%) and those in Alberta (39%) and B.C. (34%).
- Those in Manitoba and Saskatchewan (21%) are least likely to use a mortgage broker
- 38% of respondents said they would choose a broker if they were looking for a mortgage today.
- A quarter (25%) of those who obtained their current mortgage from a bank said they would turn to a broker for their next mortgage.
Reverse mortgages
- Just 6% of Canadians say they are “very” familiar with reverse mortgages, while another 24% say they are “somewhat” familiar
- A full third (34%) said they aren’t aware of reverse mortgages
- 38% of respondents say they wouldn’t consider a reverse mortgage, while another 33% said they aren’t likely to consider one
- The biggest reasons respondents said they would consider a reverse mortgage include:
- unexpected expenses (25%)
- to allow them to stay in their home (24%)
- to supplement retirement income (22%)
- for investment purposes (21%)