We asked some new questions to help mortgage professionals better understand Canadians’ home financing choices in the 2018 Mortgage Consumer Survey. Here’s a rundown of what you need to know from the survey.

In terms of home financing, there were minor differences between homebuyers, refinancers and renewers.

  • Most homebuyers and refinancers got a mortgage loan only, a fixed interest rate, 5-year renewal term and 25-year amortization period.
  • Most renewers got a fixed interest rate, a 5-year renewal term and an 11- to 20-year amortization period.

Despite the low interest rate environment, 68% of all mortgage consumers selected a fixed interest rate, with the average rate being 3.46%. This could be explained by the fact that 67% of mortgage consumers believed that interest rates would rise over the next year.

Here’s a more detailed look at the type of financing obtained by recent mortgage consumers:

  First-Time Buyers Repeat Buyers Refinancers
Only a mortgage loan 79% 74% 53%
Both a mortgage loan and a home equity line of credit* 13% 18% 24%
Only a home equity line of credit* 6% 7% 19%

*A home equity line of credit (HELOC) is a secured form of credit where the lender/bank uses the borrower’s home as a guarantee that they’ll pay back the money they borrowed.

Among all repeat buyers, 87% indicated their current mortgage was the only one they have, and 85% indicated that their mortgage was for their primary residence. Secondary residence mortgages are mainly used for:

  • an investment/rental property (46%)
  • a second home for use by a child (20%)

48% of all all mortgage consumerswould consider a longer renewal term at a fixed interest rate. Of that 48%

  • 29% would be willing to accept an increase in interest rate of 1%
  • 24% wouldn’t be willing to increase their interest rate

Now for a closer look at HELOCs:

32%  of first time buyers didn’t know what a HELOC was.

When asked specifically if they had a HELOC, and being provided with a definition, 50% of refinancers indicated that they did. For first-time buyers, the figure was 27%. For repeat buyers, it was 41%.

Here are the top reasons for requesting a HELOC:

First-Time Buyers Repeat Buyers Refinancers
  • To have control over the amount I borrow (58%)
  • To borrow when I want (34%)
  • To repay the line of credit at the pace I choose (32%)
  • To borrow when I want (47%)
  • Interest rate (34%)
  • To have control over the amount I borrow (33%)
  • To borrow when I want (46%)
  • To repay the line of credit at the pace I choose (32%)
  • To have control over the amount I borrow (31%)

The main use planned for HELOCs is for a safety net or emergency fund (for unexpected expenses, funeral expenses, job loss, etc.).

Not surprisingly, recent changes to mortgage qualification rules have had an impact on consumers. Six percent of survey respondents were renting because they couldn’t qualify for a mortgage. Three percent of respondents indicated specifically that they were renting because of recent changes to the mortgage qualification rules.

Forty percent of first time buyers didn’t know about the latest mortgage qualification rule changes. For repeat buyers, the figure was 29%.

Of those impacted by the rule changes, a decrease non-essential expenses was the main way they changed their purchase plan.

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Date Published: November 30, 2018