The CMHC (Canadian Housing and Mortgage Corporation) which provides mortgage insurance to Canadians with less than 20% deposits on home purchases, completed an on-line survey of 2,507 recent mortgage consumers — all prime decision-makers — and the result is a unique perspective on attitudes and behaviours.
Their key findings include:
Mortgage Clients are Optimistic
An overwhelmingly high proportion of mortgage consumers (nearly 90%) believe that homeownership is a good long term investment and this optimism is fairly consistent across the country. Another indicator demonstrating confidence in the future is that almost 70% of purchasers are of the opinion that now is a good time to purchase a home in their community.
Confidence among mortgage consumers is also evident in their future moving intentions. Overall, about one-third of recent mortgage consumers anticipate leaving or selling their home in the next five years. Among this group, 87% state family and or personal circumstances (i.e. growing or decreasing family size, medical issues, or job transfer), or a general desire for change is main reason for selling or leaving.
Canadians are Astute Mortgage Consumers
Today’s mortgage consumers show what can be interpreted as a fairly high level of sophistication about the mortgage process and what it takes to carry a mortgage.
For example, 80% were at least aware of the existence of credit scores and one-third, at some time, and have actually contacted a credit agency to obtain their own score.
They also have a good understanding of the maximum amount of their gross (pre-tax) income that should be used to service housing costs and other debt. Nearly nine-in-ten (87%) reported that this level should be 40% or less of gross income.
Canadian mortgage consumers are relatively knowledgeable about the function and benefits of mortgage loan insurance (MLI). Nearly three-quarters (72%) recognize that MLI helps Canadians buy a home sooner with a smaller down payment and 76% believe that MLI provides an important benefit to the financial system.
Canadians Manage Their Mortgages Prudently
Several survey findings point to Canadians being careful in how they manage mortgage debt including:
- 73% of first-time buyers used their own resources for a down payment
- 75% of purchasers have a goal to be mortgage free sooner than their current amortization
- 20% of recent purchasers have already made a lump-sum payment to their mortgage
- 40% of all recent mortgage consumers intend to reduce their amortization at their next renewal
Interestingly, as a means of reducing their amortization, 30% of mortgage consumers intend to use a combination of the mortgage features available to reduce their amortization.
Client Satisfaction Levels Still Relatively Strong
In 2009, the majority of mortgage consumers (78%) were satisfied with the service provided by either their lender or broker. Client satisfaction was also fairly consistent across all market segments. Compared to 2007, the proportion of those satisfied is down consistently by about five percentage points.
Overall, only a minority of respondents (14%) expressed any degree of dissatisfaction. The survey showed that getting the best rate or deal are the most important factors driving client satisfaction, cited by 57% of respondents.
Mortgage consumers were equally satisfied whether they used a lender or broker (79% lenders vs. 75% for brokers), but for slightly different reasons. For example, 22% of those using a broker indicated the main reason for their satisfaction was based on the ”service” provided, vs. only 11% for those using a lender. Conversely, those using a lender were nearly twice as likely to mention “a good relationship” as the basis for their satisfaction (22% for lenders vs. 12% for brokers).
In the majority of cases (76%) clients remained loyal to their existing mortgage lender. In the case of first-time buyers, 47% remained loyal to their existing financial institution. Loyalty was strongest among renewers at 90% (up from 83% in 2007). For the other three segments 2009 has seen a modest decrease in lender loyalty. This is most evident among first-time buyers where loyalty has fallen to 47% from 67% in 2007, likely a result of the increased use of brokers among first-time buyers. For repeat buyers and refinancers the decline has been more modest: from 63% in 2007 to 59% among repeat buyers, and from 71% in 2007 to 66% among refinancers.
First-time Buyers Increase Their Use of Mortgage Brokers
Survey results show that during the past twelve months about one-quarter of all mortgage transactions were arranged through the mortgage broker channel. Most notably, broker share among first-time buyers has increased to 44%, up from 35% in 2007. Among other market segments broker share has remained stable. In particular, broker share among those renewing their mortgage continues be relatively stable at 12%.
Demographically, brokers tend to do better among younger purchasers aged 25 to 34 years (42% share), and female purchasers (43% share).
For the purpose of this survey, recent mortgage consumers are segmented as follows:
First-time purchasers — those who purchased their first home in the past 12 months and took a mortgage.
Repeat purchasers — those who purchased a second or subsequent home in the past 12 months and took a mortgage.
Renewers — those who renewed their mortgage in the past 12 months.
Refinancers — those who refinanced their home through a mortgage in the past 12 months.