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Use Home Equity Borrowing Trends to Have the Competitive Edge

Home equity borrowing is on the rise.

Filings from the Office of the Superintendent of Financial Institutions (OSFI) show that home equity borrowing reached a record-high in November of 2018. It was the fifth month of consecutive growth.

According to Better Dwelling, bank filings show Canadian households owed over $296.2 billion in November of 2018, which was up 0.7% from October of 2018. It also represents a 4.72% increase from November of 2017.

The majority of Canadians taking out home equity are using the loans for personal reasons, Better Dwelling found. $266.4 billion of the home equity in November was for personal loans, compared to $29 billion for business loans.

Personal loans represented the vast majority of debt secured by home equity. Banks held $266.4 billion in November, up 0.63% from the month before. This represents a 6.42% increase compared to the same month last year. In addition, this is also the fifth consecutive month the annual pace of growth has accelerated. Households are increasingly turning to home equity to fuel personal loans once again.

These aren’t the only home equity trends we’re seeing. In the 2018 year-end Annual State of the Residential Mortgage Market report from Mortgage Professionals Canada, they revealed that:

  • On average, home equity is equivalent to 74% of the home value.
  • For homeowners with mortgages, but not HELOCs, their home equity represents 56% of the home value.
  • For homeowners with both mortgages and HELOCs, the average equity ratio is 58%.
  • For homeowners with only HELOCs, the equity share is 80%.
  • 92% of Canadian homeowners have 25% or more equity in their homes.
  • For homeowners who purchased between 2015 and 2018, the average equity ratio is 50%.

In terms of equity takeout:

  • About 10% of homeowners (965,000) took out of their home in 2018.
  • The average equity taken out in 2018 was $74,000.
  • Equity takeout is most common among those who purchased their home during 2000 to 2004.

The MPC report found that the most common uses for home equity takeout were:

  • Investments ($23.8 billion);
  • Home renovations or repairs ($17.0 billion);
  • Debt consolidation and repayment ($16.4 billion);
  • Purchases ($8.6 billion);
  • And “other” purposes ($6.2 billion).

In the home renovation bucket, MPC reported 55% of Canadian homeowners have ever renovated their current homes, including 27% who renovated during 2015 to 2018. On average, the more recent renovators spent $41,000.

In Canada in 2018, there were 9.8 million homeowners. 6.03 million of those had mortgages, 1.6 million had Home Equity Lines of Credit (HELOCs), and 4.43 million had a mortgage without a HELOC.

3.77 million homeowners have no mortgages. Of those, 500,000 have HELOCs.

3.27 million homeowners have neither a mortgage nor a HELOC.

For those who work in the mortgage lending space, the rise in home equity borrowing is a good opportunity that can be used for a competitive edge.

You might consider using a tool like Purview to find properties in your area or past clients with available equity. For instance, our Equity Estimate enables you to look at registered mortgages to estimate the equity that has been stated in the application.

You might also identify opportunities for debt consolidation solutions, or those with older homes who might be in the market to renovate.

It all starts with having the right property data – and that’s where Purview comes in.

Access our in-depth reports today. Call 1-855-787-8439 or visit www.purview.ca.

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