Canadians Got Fewer New Mortgages Last Year

Mortgage activity fell more than many people thought last year. New data from CMHC shows a 9% drop in the number of consumers getting new mortgages in 2017, among the metro areas it surveyed.

Stricter mortgage rules, higher mortgage rates and higher home prices were some of the likely causes.

Of particular interest was the drop in refinances. The number of consumers refinancing fell 10% in 2017. One can ponder how much of that was due to the government banning refinances from being default insured. That made refis relatively more expensive for lenders to fund, especially big bank competitors.

This, in turn, increased the lowest refi interest rates by at least 20+ basis points and reduced the availability of refinances.

That said, those who did do a refinance tended to ask for more money last year. The average refinance amount was $247,965 if you do a simple average of Canada’s large and mid-sized cities. That’s 7% higher than in the prior year.

Prepare for More of the Same

More interesting will be the upcoming numbers from 2018. The government’s January 1, 2018 stress test made refinances even harder to qualify for. That should reduce refinance volumes even further—bad news for many who need to consolidate debt and lighten their interest load.

Also noteworthy was the 21% plunge in people renewing with a new lender in 2017. It became harder and more expensive to switch lenders (again, thanks to government intervention). In addition, lenders continued to improved their customer retention game, increasingly using early renewal promotions and other tactics to retain customers at maturity.

That renewal trend should continue this year as almost all conventional mortgages are now subjected to the onerous new stress test. Lenders should enjoy materially higher borrower retention rates because of it.