How People are Mortgage Shopping – New Stats

More people are researching mortgages online before they confront a lender or broker. That’s the good news.

The bad news is that less than 1 in 3 are using sites like this to research mortgage rates, if CMHC’s latest data is accurate. The percentage that do use rate sites is up materially from last year’s 22%, but still too many people are missing out on the deals that can be uncovered on such sites.

Objective rate comparison portals (of which there are very few) remain the only way to quickly juxtapose mortgage rates from dozens or even hundreds of sources all in one place. That gives credit-worthy mortgage shoppers a fast benchmark for the rates they might expect.

Such insights reduce the information disadvantage laypeople face when talking to lenders and brokers, giving them leverage for negotiations and saving Canadians literally hundreds of millions of dollars in interest (combined) every five years.

If these numbers are close to reality (and we have our doubts), we need to do a better job of helping Canadians find such resources.

In the meantime, here are more great stats from CMHC’s 2019 Mortgage Consumer Survey. Our comments in italics…

On Mortgage Research

• 87% of homebuyers who researched mortgages online compared interest rates
  • That’s up from 81% last year; good to see
• 30% of homebuyers went to mortgage rate comparison websites
  • That’s up from 22% last year, but still far below where it ideally should be.
  • It’s also curiously low given that so many people claim to be researching rates online, and given rate sites dominate Google for mortgage-related searches. One almost has to wonder if there’s some kind of phrasing or sampling error on this particular poll question.
• 36% of homebuyers gathered their mortgage information from real estate websites
  • That’s an increase from 22% in 2018
  • This number will keep growing as real estate websites improve their mortgage and real estate data
  • Successful U.S. sites, like Zillow and Trulia, show just how influential realty portals can be in the mortgage space, and are a future source of competition for anyone who sells Canadian mortgages.
• 45% got their information from lender websites
  • That’s a serious decrease from 66% in 2019
  • It’s hard to say, but perhaps consumers are trusting lender websites less and looking for more objective, or useful, information sources
• 23% of homebuyers did all of their mortgage research offline
  • Yes, these people still exist

On Interest Rates

• 7 in 10 chose 5-year terms for their mortgage
  • Overall, roughly 46% of buyers have 5-year fixed rates, according to CMHC
• Half of all buyers surveyed said they would consider a term beyond five years
  • Over 30% would pay up to 1% higher, if the option was available to them, according to CMHC
  • We don’t buy this stat. You can already get 10-year fixed rates at record lows (i.e., under 3%, which is just 40 bps above 5-year fixed rates) and still nobody wants them.
• 76% obtained a regular mortgage to buy their home
• 5% obtained only a home equity line of credit (HELOC)
  • A more expensive but flexible way to buy a home, since HELOCs are fully open and offer interest-only payments
• 17% chose a combination mortgage with a HELOC (a.k.a. a “readvanceable mortgage”)
  • These are arguably the best overall products for disciplined borrowers with 20%+ equity who require a low-cost source of future funds (for investing, a second property, renovations, emergencies, etc.)

On Mortgage Brokers and Lenders

• 47% of buyers used a mortgage broker to negotiate their mortgage rate in 2019
  • That’s up from 45% in 2018
• 61% of buyers who used a mortgage broker said they did so to get a better interest rate
  • Brokers dominate on default-insured mortgage rates but aren’t as competitive with conventional rates (especially with 80% loan-to-value refinance rates and rental property rates)
• 80% of buyers said the interest rate was the top reason for choosing their lender
  • That’s tied with 80% who also cited “service” as a reason for their lender choice
• 72% of buyers remained loyal to their lender
  • Down from 75% in 2018
  • The main reasons buyers gave for switching or staying with their lender was…..wait for it…….to get a better interest rate.
• 61% of buyers who used a mortgage broker said they did so to get a better interest rate (see a trend?)
• 38% of homebuyers said they would be comfortable in managing the entire homebuying experience without meeting a professional
  • That’s down from 45% in 2018, so for all ye traditional lenders hoping for the hands of time to be wound back, here’s reason to celebrate this weekend. Prost!