As the dust settles from 2018’s slew of Canadian mortgage market changes — new stress testing regulations, increased interest rates, shifting house prices, and more — we are turning our attention to the changes that have taken place within the industry itself.
Specifically, the mortgage broker-lender market share.
New data has come out showing exactly how the Canadian mortgage market has broken down between mortgage brokers and mortgage lenders during the 2017-2018 period. Take a look:
Mortgage Consumer Survey
In 2017, CMHC’s Mortgage Consumer Survey found that the industry market share for mortgage renewers using a mortgage broker grew from 26% to 35%. The broker share of refinances was at 40%, the share of recent buyers at 44%, and the share of first-time buyers at 55%.
The 2018 Mortgage Consumer Survey was released October 18, 2018, and revealed:
- Broker share with homebuyers decreased from March of 2017 to March of 2018.
- Broker share remained steady amongst renewers.
- Broker share decreased slightly amongst mortgage refinancers.
- The majority of those seeking mortgage services found their broker through a recommendation.
- Lender loyalty increased significantly among repeat buyers but decreased for first-time buyers.
- Lender loyalty increased slightly among renewers.
- Lender loyalty decreased slightly amongst mortgage refinancers.
- The majority of those seeking mortgage services found their lender as it was already their primary lending institution.
Number of New Mortgages
In 2017, there were 959,074 new mortgage loans according to CMHC, which was a 6.5% decrease from the previous year.
- Only the category of multiple mortgage holders increased. All others declined.
- The decline in mortgage loan activity was largest among those renewing their loan with a new lender. 134,258 loans were extended to homeowners renewing with a new lender — a decline of 17.4% from 2016.
- The refinancing category dropped by 8.3%.
Mortgage in Arrears
The number of residential mortgages in arrears has dropped slightly, according to figures from the Canadian Bankers’ Association. As of June 30, 2018, 0.23% of mortgages across Canada were in arrears. The same period in 2017 had 0.25% of mortgages in arrears.
Broker Lender Market Share – Q2 2018
According to Canadian Mortgage Trends, Finastra data showed that:
- 89% of broker volume was routed to the top 10 lenders in the second quarter of 2018.
- The top broker lenders in 2018 Q2 were
- Scotiabank (22% of market share)
- MCAP/RMG (16.3%)
- First National (13.9%)
- TD Canada Trust (9.9%)
- Merix Financial (5.5%)
- Desjardins (5.2%)
- Street Capital (5.1%)
- Equitable Bank (5.0%)
- Home Trust Company (4.2%)
- Manulife Bank (1.9%)
The Bank of Canada found that more buyers are turning to private mortgages. These lenders have seen their share of the mortgage market double since 2015. Private lenders now hold 8% of Canadian mortgages (a 37.8% increase compared to 2017).
Teranet found the same conclusion in its October 2018 Market Insights Report. The MIR found that 20% of refinancing mortgage transactions (defined as mortgages registered on a property that did not involve a sale) during the second quarter of 2018 were sourced from private lenders – a 67% increase over two years ago.
What This Means for Brokers
Overall, so far in 2018 we have seen less mortgages being funded and a slight decrease in the broker share of mortgages. However, this could present an opportunity moving forward.
With more interest rate increases on the horizon, prospective homebuyers may be struggling to understand new regulations and mortgage requirements. This means the specialized services that brokers offer have even more value.
Brokers can also benefit by advertising their ability to find lower mortgage rates among new stress testing rules. More Canadians are turning to private mortgages, which also often means higher fees. If a broker can find a less expensive rate that still allows the homeowner to secure a mortgage, they could save the homebuyer a lot of money in the long run.
For brokers, referrals and website views appear to be key. Make sure to pay close attention to your digital presence and personal relationships.
What This Means for Lenders
Loyalty appears to be a big factor in mortgage client retention. The simple fact that someone already does their banking at a financial institution could sway them to fund their mortgage through the same lender.
Use this to your advantage. With this in mind, any transaction or current lending client, even outside of the mortgage realm, could be a potential customer. Identify clients who fit this profile and perhaps even consider creating client-specific promotions.
It will be interesting to see how the market share between public and private lenders shifts in the coming year.
For Both Brokers and Lenders
Accurate property data is essential. You want to be able to understand your client demographics, identify upsell opportunities, quickly assess property values, and ultimately close more deals.
That’s where Purview comes in.
Our tools can help you quickly find homeownership information, sales history, property value, mortgages registered on title, equity position, comparable property sales, and more, even as the Canadian mortgage market shifts.
Get in touch today. Call 1-855-787-8439 or visit www.purview.ca.