Half of non-homeowners in Canada shedding hope of shopping for property: MPC survey

Practically half of non-homeowners in Canada assume they’ll by no means have the ability to buy a house, in accordance with new survey outcomes from Mortgage Professionals Canada (MPC).

That determine is up by 15 share factors from simply six months earlier, highlighting the continued affordability disaster with each house costs close to their all-time peak and rates of interest at multi-decade highs.

In the meantime, simply 17% of non-owners say they’re planning to buy a major residence within the subsequent 24 months, a drop of 5 share factors from six months in the past, in accordance with MPC’s newest Semi-Annual State of the Housing Market report.

“Canadians are dealing with a housing affordability disaster with little signal of easing in sight,” mentioned Lauren van den Berg, President and CEO of MPC. “We hear this day-after-day from our members proper throughout the nation, and that’s the reason we proceed to advocate for insurance policies that break down the boundaries to homeownership.”

The survey outcomes additionally present that the present price setting is having an influence on present owners. There’s been a tripling within the share of present homeowners who’re contemplating promoting their house as a result of they will not afford their present mortgage.

Total, 64% of householders say rising charges are having a fabric influence on their monetary state of affairs, with practically a 3rd saying they’re fearful about lacking a fee, needing to promote or having to make a big life change to remain of their house.

The extent of concern is heightened amongst first-time consumers, with 72% saying they’re involved and seven% pondering they are going to be pressured to promote.

Renewals are one other level of stress for a lot of debtors, particularly since 65% count on to resume their mortgage over the subsequent three years. Greater than two thirds (69%), say they’re anxious about their renewal, a rise from 63% simply six months in the past.

Perception into the mortgage market

The report offered a wealth of perception into different subjects, corresponding to mortgage product preferences, mortgage dealer share and shopper loyalty.

Mortgage dealer share rose two factors in comparison with final 12 months, with 31% of respondents saying they used the providers of a mortgage dealer. That share rises to 38% who mentioned they’d select a dealer in the event that they have been searching for a mortgage right now.

By way of mortgage merchandise, mounted charges as soon as once more dominate client choice, with practically three quarters (72%) of excellent mortgages now with a set price. Amongst new originations as of Might, simply over 7% of debtors selected a variable price.

Debtors are additionally more and more gravitating in the direction of shorter phrases, with one in 5 debtors (21%) choosing a time period of 1 to 3 years on the expectation that charges will begin to fall.

5-year phrases, nonetheless, stay the preferred time period size, representing 61% of mortgages taken out previously two years.

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Survey highlights: The mortgage market

Mortgage Sorts

• 72% of mortgage holders had a fixed-rate mortgage as of mid-2023
• 23% of mortgage holders had a variable price
  • For brand spanking new mortgage originations as of Might, simply 7.4% took a variable price, down from the height share of 57% in January 2022
• 3% of debtors have a hybrid (half-fixed, half-variable) mortgage

Variable-rate mortgages

• 60% of variable-rate holders report having an adjustable-rate mortgage, that’s, one the place the funds fluctuate as prime price rises or falls.
  • The opposite 40% have fixed-payment variable-rate mortgages, the place the month-to-month fee stays fixed, however as charges rise much less of the month-to-month fee goes in the direction of principal compensation and a larger portion goes in the direction of curiosity prices.
• 40% of variable-rate debtors plan to lock in to a set price.
  • One other 29% say they’re contemplating switching to a set price.
  • And 1 / 4 (27%) mentioned they gained’t think about switching to a set price.

Mortgage phrases

• Amongst mortgages taken out within the final two years:
  • 61% had a time period of 5 years
  • 14% had a 3-year time period
  • 6% had a 2-year time period
  • 7% had a 4-year time period
• Causes for selecting a shorter time period included:
  • 61% count on charges to fall
  • 39% merely opted for a time period with a decrease price
• First-time consumers (25%) are selecting shorter phrases (1 to three years) extra usually than non-first-time consumers (15%)

Mortgage prepayments

• 39%: Proportion of mortgage holders who voluntarily take motion to shorten their amortization intervals (down from 45% in 2022)
  • These in Ontario (36%) and B.C. (35%) are most definitely to be paying greater than the required quantity on their mortgage
  • Mortgage dealer purchasers are extra accustomed to the prepayment choices obtainable to them in comparison with financial institution purchasers (66% vs. 61%)
• Amongst prepayment actions taken:
  • 30% made a lump-sum fee (up from 19% final 12 months)
    • The common lump-sum fee: $21,502
  • 37% elevated the quantity of their fee (up from 18%)
    • The common fee enhance: 611 per 30 days (up from $583 a month, final 12 months)
  • 33% elevated their fee quantity and made a lump sum fee

Renewals

• 65% of mortgage holders count on to resume their mortgage throughout the subsequent three years
  • Of these:
    • 9% count on to resume within the subsequent 6 months
    • 10% count on to resume their mortgage throughout the subsequent 6 to 12 months
• 69% say they’re anxious about their renewal (up from 63% six months in the past)
  • 78% for first-time debtors
  • 87% for new-to-Canada debtors
• 78% of mortgage dealer purchasers say their plan to make use of the identical mortgage skilled for his or her upcoming renewal
• 80% of respondents plan to stay with their present mortgage lender

Mortgage penalties

• 11% of debtors paid a penalty to interrupt their most up-to-date mortgage
  • 80% mentioned they didn’t pay a penalty and 9% mentioned they don’t know
• 49% of those that paid a penalty mentioned they mentioned it with their mortgage skilled
  • 33% mentioned they didn’t focus on it and 18% don’t know

Dealer share

• 31% of mortgage debtors used the providers of a mortgage dealer once they obtained their mortgage
  • Up two factors from final 12 months
  • First-time consumers (42%) are most definitely to make use of the providers of a mortgage dealer, in addition to these between the ages of 18 and 42 (41%) and people in Alberta (39%) and B.C. (34%).
  • These in Manitoba and Saskatchewan (21%) are least probably to make use of a mortgage dealer
• 38% of respondents mentioned they’d select a dealer in the event that they have been searching for a mortgage right now.
• 1 / 4 (25%) of those that obtained their present mortgage from a financial institution mentioned they’d flip to a dealer for his or her subsequent mortgage.

Reverse mortgages

• Simply 6% of Canadians say they’re “very” accustomed to reverse mortgages, whereas one other 24% say they’re “considerably” acquainted
  • A full third (34%) mentioned they aren’t conscious of reverse mortgages
• 38% of respondents say they wouldn’t think about a reverse mortgage, whereas one other 33% mentioned they aren’t more likely to think about one
• The largest causes respondents mentioned they’d think about a reverse mortgage embody:
  • surprising bills (25%)
  • to permit them to remain of their house (24%)
  • to complement retirement revenue (22%)
  • for funding functions (21%)

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