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The Annual State of the Residential Mortgage Market report from Mortgage Professionals Canada is always an insightful publication, and the Year End 2018 edition is no exception.

The 2018 release focuses on new Canadian mortgage regulations — specifically, the B-20 lending guidelines, which include a stress test for uninsured mortgages and tighter lending criteria for federal lenders.

According to the research report, since the new stress test was introduced in January 2018 resale activity fell to about 458,400, a drop of 11% compared to 2017 and 15% compared to 2016. MPC noted that the reduction may also be due to interest rate increases that occurred during the year. However, they wrote that most of the reduction in sales during 2018 was due to the mortgage stress tests.

MPC predicts that by October 2019 about 200,000 Canadian families will “have encountered sharp personal disappointment as the direct result of this pair of policies (they will either have significantly reduced their housing expectations in order to obtain financing or been entirely prevented from buying a home).”

For more about MPC’s calls for mortgage stress test reform, see our recent blog on the subject:

The bulk of the Year End report delves into mortgage trends from 2018. We’ve highlighted some stand-out figures below.

Mortgage Types and Amortization

For homes purchased during 2018 with a mortgage:

  • 68% have fixed interest rates.
  • 30% have variable or adjustable rates.
  • 2% have a combination mortgage.

For all mortgages, regardless of date of purchase:

  • 89% have contracted periods of less than 25 years.
  • The average contracted amortization period is 20.8 years.

For homes purchased during 2015 to 2018,

  • 84% have contracted amortization periods of 25 years or less.
  • 16% have extended amortization periods.
  • The average contracted amortization period is 22.2 years.
  • The average amortization period increased as Canadians are motivated to repay their mortgages as quickly as possible.
  • Each year about 1/3 of mortgage holders take actions to shorten their amortization periods.

Mortgage Arrears

The rate of mortgage arrears remains very low, and has in fact fallen further, to 0.24% as of September 2018.

Mortgage Borrowing and Interest Rates

 Among people who took out a new mortgage during 2017 or 2018:

  • 62% obtained the mortgage from a Canadian bank.
  • 28% obtained the mortgage from a mortgage broker.
  • 10% of mortgages came from other categories.

For mortgage interest rates:

  • The average was 3.09% in 2018, a rise from 2.96% in 2017.
  • For mortgages on homes purchased in 2018, the average rate is 3.31%.
  • For mortgages renewed in 2018, the average rate is 3.31%.
  • For renewals, 68% say their mortgage rate rose and 24% saw reductions.
  • The average renewal rate rose by 0.25 percentage points in 2017.
  • Mortgage discounting continues to be a trend. The average actual rate for 5-year fixed-rate mortgages in 2018 was 3.4% while the average posted rate was 5.26% – a decrease of 1.86%. However, the average discount in 2017 was 2%.

Home Equity

  • 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%.
  • About 10% of homeowners (965,000) took out of their home in 2018.
  • The average equity taken out in 2018 was $74,000.
  • The most common uses for home equity takeout were investments, home renovations or repairs, debt consolidation and repayment, purchases, and “other” purposes.
  • Equity takeout is most common among those who purchased their home during 2000 to 2004.

The full report is available on the Mortgage Professionals Canada website. Find it here:

The MPC year-end report works well with Purview’s tools. Our property data can help you work with the trends and find new opportunities. Learn about our in-depth property reports, fraud mitigation, demographic data, and more today.

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