Background

When it comes to tracking trends in Canadian mortgage activity, data gaps continue to pose challenges. Using data from consumer credit reports, CMHC has analyzed different types of new mortgage loans. Here are the categories of new loans we were able to analyze using the data:

  • New owners
  • Repeat buyers
  • Refinances
  • Renewals with a new lender
  • Multiple mortgage holders (consumers with multiple mortgages on their credit file)

Renewals with the same lender are usually not captured in the data. This is because the open dates on the consumer reports don’t change, and the mortgages therefore can’t be detected as new.

Chart 1: New mortgages slightly declined in 2017

Number of New Mortgages by Type

Text Version

Chart 1. New mortgages slightly declined in 2017
Repeat Buyers Multiple Mortgage Holders Renewal with New Lender Refinances New Owners Grand Total
2015 96,291 138,471 153,746 210,590 413,380 1,012,478
2016 97,429 139,221 162,574 219,524 406,678 1,025,426
2017 92,173 145,013 134,258 201,324 386,306 959,074

Key Findings

In 2017, there were 959,0741 new mortgage loans, a 6.5%2 decline compared to 2016. Only the category of multiple mortgage holders grew from 2016 to 2017; all other categories declined. The decline in new mortgage loan activity was largest among owners renewing their loan with a new lender. Specifically, we estimated that 134,258 loans were extended to homeowners renewing with a new lender. This represents a decline of 17.4% from 2016.

The next largest decrease was in the refinance category (8.3%). Refinances include consumers who renegotiated their existing mortgage for a larger amount. In such cases, the extra funds are typically used to finance major spending, such as home renovations, or to consolidate debt. The decline in refinance activity may indicate that fewer homeowners want to leverage their property. This is consistent with the slowdown in house price growth in some of the major markets.

The new owner and repeat buyer categories are more responsive to market conditions. This is because they capture activity tied to sales of properties. In both cases, the number of loans compared to 2016 declined along with home sales, (drops of 5% and 5.4% respectively). Together, these two categories accounted for about half of new loans recorded last year: 40.3% to new owners, 9.6% to repeat buyers.

The reduction in new mortgages could be explained by the 2016 mortgage rule change.  According to this change, all mortgages with less than a 20% down payment would have to qualify at the greater of:

  • their contract mortgage rate; or
  • the Bank of Canada’s conventional five-year fixed posted rate.

This would decrease the borrowing power of consumers looking for a new mortgage.

Chart 2: Slowdown in new mortgage activity spreads across regions

Growth in 2017

Text Version

Chart 2. Growth in 2017
Repeat Buyers Multiple Mortgage Holders Renewal with New Lender Refinances New Owners
Rest of Canada -0.50% 5.30% -13.90% -5.29% -2.75%
Toronto -16.95%

6.44%

-25.66% -8.89% -8.14%
Vancouver -21.68% -7.01% -33.32% -18.05% -16.31%
Montreal -1.43% 4.01% -15.95% -20.44% -3.40%

Largest declines seen in Vancouver and Toronto

As mentioned before, fewer new mortgages were issued in Canada in 2017 than in 2016. The largest declines came from the two most expensive markets, Vancouver and Toronto. Examining the different census metropolitan areas (CMAs), we see that Calgary and Edmonton also had large declines in all new mortgages categories. 

In Vancouver and Toronto, new taxes3 for reducing speculative activity in the housing market may have caused this weaker activity. Why do we think this? Because sales dropped following the introduction of the taxes.  In Calgary and Edmonton, demand for housing continued to slow due to challenges in the energy sector. 

For Canada, the largest decrease in new lending activity was in the renewals with a new lender category. In Vancouver and Toronto, decreases in this category were larger than average, at 33.3% and 25.7%, respectively. The decline in this category was found in most of the major CMAs, including Calgary (25.6%), Ottawa-Gatineau (23.9%), Halifax (21.3%) and Montréal (15.95%).

Vancouver and Toronto also showed declines in repeat buyers (21.7% and 17%, respectively). In contrast, this category remained relatively unchanged in the rest of Canada. The declines in Vancouver and Toronto could therefore be an indication of affordability issues in the two cities. Existing owners may have preferred to remain in their properties, expecting:

  • difficulties finding a new property within their means; or
  • difficulties selling at the price they want.

We also found that the number of multiple mortgage holders decreased in certain CMAs, including Vancouver, Calgary, Edmonton, Ottawa-Gatineau, Québec City and Halifax. This could suggest that the 2016 mortgage rule change decreased consumers’ ability to fund a second or third mortgage in these CMAs.


1 In August 2016, the government of British Columbia began charging foreign buyers a new 15% tax when they bought homes in the Vancouver area. In April 2017, the Ontario government’s Fair Housing Plan introduced a 15% Non-Resident Speculation Tax (NRST) on the purchase or acquisition of certain residential properties in the Greater Golden Horseshoe area.

2 This report uses data from the credit rating agency Equifax Canada covering approximately 80 – 85% of the mortgage market. CMHC did not access or receive personal identifiable information on individuals in producing this report.

3 All figures are sourced from Equifax Canada unless otherwise stated.

CMHC’s method to create the estimates

The source data doesn’t have information on the origination categories of the loans. CMHC creates estimates based on characteristics found on the consumers’ credit report:

  • New owner: Consumer did not have a mortgage in the previous quarter, but has a mortgage in the current quarter.
  • Repeat buyer:  Consumer had a mortgage in the previous quarter and the current quarter, but the address changed.
  • Renewal with a new lender: Consumer had a mortgage in the previous quarter; opened a mortgage in the current quarter; the address is the same; the total mortgage balance is the same, lower or increased by less than 10%; and the number of mortgages on the report is the same.
  • Refinance: Consumer had a mortgage in the previous quarter, opened a mortgage in the current quarter, the address did not change, the total mortgage balance increased by more than 10% and the number of mortgages on the report is the same.
  • Multiple mortgage holder:  Consumer had a mortgage in the previous quarter, opened a mortgage in the current quarter, the address is the same, the total mortgage balance increased by more than 10% and the number of mortgages increased.

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Date Published: August 14, 2018