Mortgage Consumer Insights
The Canada Mortgage and Housing Corporation (CMHC) released its annual 2024 Mortgage Consumer Survey on May 8, 2024. The survey had feedback from nearly 4,000 people in Canada who renewed or refinanced a mortgage, or bought a home over the past 18 months. It sheds light on the opinions and behaviours of Canadian mortgage consumers, and highlights ongoing concerns affecting them, such as affordability challenges and rising interest rates.According to the survey, 15% of Canadians took out a mortgage during the survey period, which is comparable to the 16% who did during the 2023 survey. Of those, 62% were renewing, increasing from 58% in 2023, while 18% were homebuyers, decreasing from 23% in 2023. 19% were refinancing,Over the 18-month period, interest rates rose significantly, influencing the decisions of potential homebuyers. 22% of home buyers purchased their home earlier than planned because of these rising rates, while 13% chose to delay their purchase. The numbers of those delaying were nearly three times higher than in 2023. First-time buyers and newcomers were most impacted, at 18% and 26%, respectively, choosing to postpone their purchases. There was a significant rise in the numbers affected by interest rates, from 50% in 2023 to 65% this year.An average saving period of 4.2 years for a down payment was reported. 30% of buyers received financial assistance, indicating a strong trend of many home buyers needing help to break into a challenging market. Of the buyers who received a gift for the down payment, 32% reported they would not have been able to purchase a suitable home without this assistance. Canadians are also finding other ways to achieve ownership despite difficulties; 12% of respondents bought a property with a non-spousal family member or a roommate.33% reported refinancing a mortgage to complete renovations or home improvements, while 23% refinanced for debt consolidation. 12% of refinancers added a supplementary suite, suggesting a growing trend towards enhancing property value and optimizing living spaces. Despite economic uncertainties, 79% of mortgage consumers see home ownership as a sound long-term investment. Optimism about property values was also strong, with 65% anticipating an upswing in value over the next year, reflecting continuing confidence in real estate as a wealth-building asset; this was an increase over the 55% who were confident in 2023 that their properties would increase in value over a 12-month period.For real estate investors and private mortgage lenders, the survey findings unveil crucial insights into market dynamics and consumer behaviour. The heightened sensitivity to interest rate fluctuations underscores the importance of closely monitoring economic indicators and adjusting investment strategies accordingly. Additionally, the growing emphasis on home improvement projects presents lucrative opportunities for investors to capitalize on the burgeoning demand for renovation financing solutions. Moreover, the prevalence of co-ownership arrangements signifies a shift towards innovative financing models, presenting new avenues for private mortgage investors to diversify their portfolios and cater to evolving consumer preferences.An interesting trend is the increasing prominence of digital avenues when it comes to buying real estate. The majority of consumers research online before completing a mortgage transaction, and 52% completed the process completely online, up from 34% in 2023. This parallels the trend of buyers using online research for researching properties to buy, which could be as high as 97%, as well. It is clear that investors, lenders, and sellers need to enhance their digital presence to cater to this trend.
Potential Homeowner Interest and Rate Cuts
The latest Bank of Canada rate announcement was to hold its overnight rate target at 5%, alongside a bank rate of 5.25% and a deposit rate of 5%. Cuts are expected, but the precise timing and magnitude of these cuts are still being debated. Meanwhile, some experts, although expecting cuts to eventually come, have been calling for more aggressive rate cuts to stimulate the economy.Now, new information is coming out that may suggest rate cuts, which may lead to lower mortgage rates, could boost potential homeowners into buying again. A Bank of Montreal survey suggests that 72% of potential homeowners are holding off on buying a house until interest rates drop. This is an increase of 4% from the previous year. While this suggests that rate cuts could prompt greater confidence in buying, there are other financial and economic concerns noted in the survey that are discouraging potential homeowners from taking the plunge. This includes concerns about the cost of living, inflation, fear of unknown expenses, and overall finances. While this survey shows how cautious aspiring homeowners are being, it did also find, on a more positive note, that 85% of Canadians believe they are making “real financial progress”.Another recent survey from RBC also had more positive findings. There is an uptick of people looking to buy in the next two years – 29% compared to 22% in 2023. A majority of 60% believe home or condo ownership is still a good investment, which is an increase from 2023. Furthermore, 41% of potential home buyers expect to be able to save enough for a down payment in four years or less. However, this confidence is still tempered by financial concerns and fears about homeownership costs. It also noted that 50% of Canadians are saving less due to inflation, and 57% of respondents indicated they would require a side hustle or second job to afford a home. 36% report that they’re not saving monthly, which is a notable increase from the 8% reported in 2023. Despite economic challenges, there’s a continuing sentiment in Canada that homeownership remains a valuable investment. However, practical hurdles, such as affordability constraints, inflation, and interest rates, are causing potential homeowners to look at second jobs or other sources of supplementary income, or find other strategies to address the financial hurdles they are facing. Nevertheless, there are notes of optimism and signs of ongoing interest in real estate, especially if rates drop.
Rising interest rates and affordability concerns continue to impact Canadian homebuyers: CMHC
Last week, Canada Mortgage and Housing Corporation (CMHC) released its 2024 Mortgage Consumer Survey which showed affordability and rising interest rates continue to be some of the biggest factors affecting mortgage consumers. In January, CMHC surveyed almost 4,000 recent mortgage consumers across Canada who renewed or refinanced a mortgage, or purchased a home in the past 18 months. ‘Consumers and (their) mortgage professionals are working hard to facilitate viable solutions to financing challenges’ Sam Carnovale, CMHC’s director of client relationship management, notes, “Concerns over housing affordability and interest rates continue to prove challenging for homebuyers in Canada. We are seeing that consumers and the mortgage professionals who serve them are working hard to facilitate viable solutions to housing financing challenges, such as co-ownership arrangements and refinancing for renovations.” Mortgages, interest rates, purchase postponement and saving for a down payment Overall, the mortgage landscape was pretty similar compared to last year, with 15 per cent of Canadians taking out a mortgage in the last 18 months, compared to 16 per cent in 2023. Although 63 per cent of homebuyers are concerned or uncertain throughout the process, most mortgage consumers (79 per cent) still believe a home is a good long-term financial investment. During the 18-month period the survey covered, interest rates reached levels not seen in years. 22 per cent of respondents who purchased a home said rising interest rates influenced their decision to buy sooner than planned, and 13 per cent said they delayed their home purchase nearly three times more than in 2023. First-time buyers (18 per cent) and newcomers (26 per cent) were most likely to postpone a purchase. Compared to the 2023 survey, more mortgage consumers were impacted by rising interest rates (65 per cent compared to 50 per cent). It took 4.2 years on average for homebuyers to save for a down payment, with 30 per cent of buyers receiving a gift to help with the cost. 12 per cent of all respondents shared the purchase of their home with a roommate or an adult family member they live with (other than a spouse/partner). Review more survey highlights here.
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