Top 3 Trends from our Fall 2022 Residential Mortgage Industry Report

The Residential Mortgage Industry report provides an economic analysis of the residential mortgage industry in Canada. It reviews the latest data on insured and uninsured mortgages from all lender types and provides details on emerging trends in the Canadian residential mortgage industry.

Using the latest data available, the Fall 2022 Report indicated:

• After increasingly opting for variable rates, more than half of Canadian homeowners chose fixed-rate mortgages.
• Some people are having a hard time getting loans from regular banks due to stricter rules and higher interest rates. Alternative lenders are a growing market for these people.
• Mortgage loans for property purchases decreased by 5.5% and refinanced mortgages decreased by a whopping 13.3%.

More than half of homeowners in Canada opt for fixed-rate mortgages

The gap between homeowners choosing variable-rate and fixed-rate mortgages has been closing. Since June 2022, federally regulated financial institutions have lent more funds for new and renewed mortgages under fixed-rate agreements than variable-rate agreements: 55% of recent mortgage borrowers opted for a fixed-term mortgage.

So far in 2022, consumers who have opted for fixed-rate mortgages have favoured shorter-term commitments — less than 5 years — versus mortgages of 5 years or more.

Alternative lenders — a growing market 

Stricter mortgage rules coupled with rapidly increasing interest rates make it harder for some mortgage borrowers to get a loan from conventional lenders. This means fewer mortgage borrowers can switch from an alternative lender to a conventional one at their loan term.

We see a larger share of mortgage borrowers renewing their loans in the alternative lending space — either with the same alternative lender or another. As it becomes increasingly challenging to qualify under the current interest rate environment, 1 in 3 mortgage borrowers renews with an alternative lender.

About 70% of mortgage borrowers had an effective exit strategy. This is lower than in 2020 and 2021 when this figure was stable at 72%. This recent drop was also because fewer properties sold at loan term.

As these mortgage borrowers stay in the alternative lending space for a longer time — and pay higher interest rates — housing affordability is an issue for them.

Mortgages drop for both property purchases and refinancing

The most recent data show a decrease in new mortgage originations. This is because of:

• economic uncertainty
• rising interest rates
• inflationary pressure 

As interest rates increased and housing markets cooled, mortgage loans for property purchases dropped by 5.5%. Refinanced mortgages had the most significant decrease at 13.3%!

Chartered banks originated $191 billion worth of mortgage loans. This is a 7.9% decrease compared to the same period in 2021.

Non-bank mortgage lenders such as credit unions, mortgage finance companies and mortgage investment entities issued $110 billion worth of mortgage loans. This is a more than 23% drop compared to the same period in 2021.

See the full Residential Mortgage Industry Report for all industry trends and findings from our research.

Download the report (PDF)

Related links:

• The road ahead for the economy and housing — fall 2022 update
• Alternative lenders series