6
We are pleased to share with you the fifth edition of the Teranet Market Insights Report. This report delivers a comprehensive analysis and new insights on the real estate market in Ontario and includes data compiled by our data scientists. In this edition, we’re focusing on the impact of the stress test implemented in 2018. We’ll explore how it affected mortgage activity and the market share of Ontario’s banks and lenders. This report will look at data from the past seven years and analyze demographic information. The impact of the stress test It has been over a year since the Office of the Superintendent of Financial Institutions (OSFI) published revisions to the B-20 Guideline. The biggest change was the implementation of a 2% stress test on all uninsured mortgages. This means that when mortgagors apply for a mortgage from a federally regulated lender, they will have their finances “stress tested” to ensure they would still be able to pay off the loan if rates were 2% higher. As a result of this, an average home buyer saw the mortgage amount they could qualify for cut by 20%. A mortgagor that would have qualified for a $700,000 mortgage prior to the stress test would now only be able to qualify for a $560,000 mortgage (assuming there are similar terms, rates, etc.). These changes are not applicable to mortgagors renewing their mortgage with the same lender, which would lead one to assume that mortgage refinances 1 would have become more popular than mortgage switches 2 before or at the time of expiry of the mortgage term. However, this was not the case. To gauge customer activity around a decision to refinance or switch, we created an analysis of all refinances and switches in Ontario from January 2016 to December 2018. MARKET INSIGHTS THE CANADIAN SOURCE FOR HOUSING INFORMATION | MARCH 2019 ©TERANET. ALL RIGHTS RESERVED. 1.855.787.8439 | [email protected] | teranet.ca ¹ a renewal or new mortgage to replace the original from the same lender and where a transfer of sale has not taken place ² a new mortgage to replace the original from a different lender and where a transfer of sale has not taken place REFINANCE AND SWITCH VOLUME Source: Teranet

Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

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Page 1: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

For Media Inquiries, please contact: Emily Boyce, Teranet [email protected]

For more information about the data presented in this publication, please contact: Kan ZhuLeader, Data & Advisory SolutionsTeranet [email protected]

MARKET INSIGHTS | MARCH 2019

We investigated the market share of various lender segments within these demographic categories for the past three years and saw some interesting trends emerge.

Consider the fi gures for 2018, the Traditionalists have 76% of their mortgages with the Big-5, Baby Boomers have 74% (a drop of 2%), Generation X have 71% (a drop of another 3%), Millennials have 69% (another drop of 2%), and Generation Z have just 56% (a drop of 13%).

Credit unions have increased market share with nearly all segments and have Millennials as the third highest market segment (based on percentage). The fact that the Millennial segment has increased 85% since 2012 and is the emerging home buyer demographic, may bode well for credit unions if we see these trends continue.

As new generations emerge and enter the mortgage market, it will be interesting to see the shifts in buying behavior, lender loyalty and expectations when it comes to mortgages in Ontario. The Teranet Market Insights Report will continue to monitor these trends and report on their signifi cance to the real estate and fi nancial services community.

80%

78%

76%

74%

72%

70%

68%

66%

64%

62%

60%

58%

56%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

78%77%

76%76%

75%74%

73% 72% 73%74%

74%

71%

69%

67%67%

66%

68%68%

73%

69%69%69%70%

68%

80%

74%

71%

63%

56%

68%

75%

73%

76%

2012 2013 2014 2015 2016 2017 2018

4%

3%

2%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

3.7%3.7%

3.3%

2.9%2.9%2.8%

3.2% 3.2%3.1%

2.9%

2.4%

2.6%

2.4%

1.9%

1.9%

2.7%

3.1%

3.5%

4.6%

4.2%4.2%

3.6%

3.6%

2.2%

1.3%

1.9%

4.0%

2.2%

1.4%

4.1%

3.1%

2012 2013 2014 2015 2016 2017 2018

YEAR

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

BIG-5 BY AGE GROUP

CREDIT UNION BY AGE GROUP

Source: Teranet

Source: Teranet

For more information about Teranet Solutions, please contact:

[email protected]@teranet.ca [email protected] [email protected] [email protected]

[email protected]

British [email protected]

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

We are pleased to share with you the fi fth edition of the Teranet Market Insights Report. This report delivers a comprehensive analysis and new insights on the real estate market in Ontario and includes data compiled by our data scientists.

In this edition, we’re focusing on the impact of the stress test implemented in 2018. We’ll explore how it aff ected mortgage activity and the market share of Ontario’s banks and lenders. This report will look at data from the past seven years and analyze demographic information.

The impact of the stress testIt has been over a year since the Offi ce of the Superintendent of Financial Institutions (OSFI) published revisions to the B-20 Guideline. The biggest change was the implementation of a 2% stress test on all uninsured mortgages. This means that when mortgagors apply for a mortgage from a federally regulated lender, they will have their fi nances “stress tested” to ensure they would still be able to pay off the loan if rates were 2% higher. As a result of this, an average home buyer saw the mortgage amount they could qualify for cut by 20%. A mortgagor that would have qualifi ed for a $700,000 mortgage prior to the stress test would now only be able to qualify for a $560,000 mortgage (assuming there are similar terms, rates, etc.).

These changes are not applicable to mortgagors renewing their mortgage with the same lender, which would lead one to assume that mortgage refi nances1 would have become more popular than mortgage switches2 before or at the time of expiry of the mortgage term. However, this was not the case.

To gauge customer activity around a decision to refi nance or switch, we created an analysis of all refi nances and switches in Ontario from January 2016 to December 2018.

MARKET INSIGHTSTHE CANADIAN SOURCE FOR HOUSING INFORMATION | MARCH 2019

©TERANET. ALL RIGHTS RESERVED.1.855.787.8439 | [email protected] | teranet.ca

¹ a renewal or new mortgage to replace the original from the same lender and where a transfer of sale has not taken place² a new mortgage to replace the original from a diff erent lender and where a transfer of sale has not taken place

REFINANCE AND SWITCH VOLUME

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Millennials narrowly have the majority of the market with 35.6%, just surpassing Generation X who have 34.2%. Baby Boomers, no longer the dominant share, represent just 23% of the mortgage market. We’ve also seen the emergence of Generation Z in the mortgage market, and while they don’t represent a big piece of the market yet, they will be an interesting demographic to watch.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

PERC

ENTA

GE

OF

REG

ISTE

RED

VAL

UE

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Baby BoomersGeneration XGeneration Z Millenials Traditionalists

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

73.9

%

71.2

%

3.2%

8.8%

5.6%

11.1

%

55.9

%

69.4

% 75.7

%

2.2%

16.7

% 21.3

%

3.9%

3.5% 8.

3%

5.7%

13.1

%

4.6% 7.

3%

6.4%

6.2%

3.7%

8.0%

6.1% 8.

3%

Highest PrivateLender Percentage

21%

DEMOGRAPHIC BREAKUP OF ONTARIO’S MORTGAGE MARKET

6.5%Traditionalists

23.4%Baby Boomers

34.2%Generation X

0.4%Generation Z

35.6%Millenials

CATEGORY

Baby BoomersGeneration XMillenialsGeneration Z

Traditionalists

DEMOGRAPHICS

Source: Teranet

Source: Teranet

Generation ZBorn 1997-Present

(4-24 years old)

MillennialsBorn 1981-1996(25-39 years old)

Generation XBorn 1965-1980(40-54 years old)

Baby BoomersBorn 1946-1964(55-73 years old)

TraditionalistsBorn 1928-1945(74-94 years old)

Page 2: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

MARKET INSIGHTS | MARCH 2019MARKET INSIGHTS | MARCH 2019

In the table below we highlight major changes in market share between 2017 and 2018. The Big-5 have traditionally had around 73% of the market, however, in 2018 saw a reduction of 2.7% in their share. This gain went to credit unions, private lenders and trust companies, with each increasing market share by about 0.8%.

The impact by geographyA closer look at these three lender groups shows that credit unions and private lenders have been consistently growing since 2016 and have made some impressive gains in almost all geographic regions.

These results point to two possible outcomes caused by the stress test: fi rstly, the Big-5 have been impacted negatively because more mortgagors are willing to switch their mortgage to another institution instead of refi nancing and renewing with their current bank. Secondly, the stress test rules don’t apply to the provincially regulated private lenders and credit unions, which has given them growth of nearly 1% market share in the fi rst year after the stress test was implemented.

We also looked at data from all mortgages registered in Ontario from January 2012 to December 2018 in specifi c regions.

Since 2012, the Big-5 have dominated the market and have consistently held onto a share greater than 72%. However, in 2018 after the stress test was implemented, the Big-5 lost 2.7% of their market share. There have been shifts amongst other lenders as well. Credit unions and private lenders have seen gains of almost 2%, but this can’t all be credited to the stress test. These two lender groups have had gains of over 45% of their share since 2012.

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Category 2012 2013 2014 2015 2016 2017 2018Percentage

Change 2012-2018

Big-5 72.5% 71.8% 73.0% 73.5% 73.7% 75.3% 72.6% 0.1%

Credit Union 4.2% 4.9% 5.0% 4.9% 5.1% 5.3% 6.1% 1.9%

Insurance Companies 0.5% 0.4% 0.4% 0.4% 0.4% 0.2% 0.2% -0.2%

Investment Firms 0.2% 0.3% 0.3% 0.4% 0.5% 0.5% 0.6% 0.4%

Monolines 3.2% 4.3% 2.5% 3.7% 3.6% 2.7% 2.7% -0.6%

Other Banks 8.9% 7.5% 7.7% 7.9% 7.1% 7.5% 7.7% -1.1%

Private Lenders 4.4% 4.4% 4.8% 4.5% 4.9% 5.8% 6.7% 2.3%

Trust Company 6.1% 6.4% 6.3% 4.8% 4.9% 2.7% 3.4% -2.7%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Groups 2016 2017 2018Percentage

Change 2017-2018

Big-5 73.7% 75.3% 72.6% -2.7%

Credit Union 5.1% 5.3% 6.1% 0.8%

Insurance Companies 0.4% 0.2% 0.2% 0.0%

Investment Firms 0.5% 0.5% 0.6% 0.1%

Monolines 3.6% 2.7% 2.7% 0.0%

Other Banks 7.1% 7.5% 7.7% 0.3%

Private Lenders 4.9% 5.8% 6.7% 0.8%

Trust Companies 4.9% 2.7% 3.4% 0.7%

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Retention declines post stress testThe fi rst thing that stands out is the drop in mortgage refi nance and switch activity. The market has seen a drop of nearly 24%, or over 50,000 mortgages in just one year. This may be due to mortgagors staying through their term and not exploring options for a refi nance or switch as aggressively as they may have done before.

Further, when we look at the percentage composition of mortgage refi nance and switches, a surprising pattern comes up. In 2018, the percentage of total non-purchase mortgages refi nanced or switched fell by nearly 6%, in a year when it may have been expected to rise due to the stress test. This comes on the back of a rising trend from 2016-2017, when refi nances captured 54.6% of total mortgages in Ontario.

A 24% fall in total number of mortgage refi nance and switches in 2017-2018 and a fall in the percentage of mortgage refi nance and subsequent rise in the percentage of mortgage switches illustrates two impacts of the stress test:

1. Mortgagors were willing to wait out the term of their mortgage in order to potentially avoid new terms as a result of the stress test from their current lenders.

2. Many existing mortgagors were not impacted by the stress test as evidenced by higher percentage of switches.

With switches increasing and mortgagors being more willing to shop around, we wanted to take a deeper look at where the switches were going. For this we looked at the switch-out (the lender whom the mortgagor has shifted their mortgage from) and the switch-in (the lender whom the mortgagor has shifted their mortgage to) data from January 2016 to December 2018. We concentrated on two blocks of lenders: Big-5 and Others.

From January 2016 to December 2018 some interesting trends took place that show a weakening position for the Big-5 banks.

First, mortgage switches in favor of Big-5 from Others fell by 5.5% from 59.9% in 2017 to 54.5% in 2018 or a drop of 8,000 switches. Second, mortgage switches in favor of Others over Big-5 increased by from 32.2% in 2017 to 34.3% in 2018. This, combined with the fact that the Big-5 have lost nearly 3% market share, point to the stress test negatively impacting the Big-5.

If the Big-5 is losing, who is gaining from the stress test? To answer this question we looked at data across all Ontario lender groups (Big-5, credit unions, insurance companies, investment fi rms, monolines, other banks, private lenders and trust companies) from January 2016 to December 2018.

REFINANCE AND SWITCH PERCENTAGE

SWITCH-OUT

2017 2018

SWITCH-IN Big-5 Others Big-5 Others

Big-5 40.1%18,815

59.9%28,159

45.4%17,073

54.5%20,531

Other 32.2%15,175

67.8%31,953

34.3%14,588

65.6%27,881

Source: Teranet

Source: Teranet

When we look at a market share from a regional perspective there’s a clear distinction between the Big-8 Ontario markets (see map below) and the rest of Ontario. The Big-5 banks have remained popular in the bigger Ontario markets and made signifi cant increases in 2017. Private lenders have also gained popularity in these markets since 2016. In fact, private lenders have grown by about 84% in the past seven years in Ontario’s biggest markets. Credit unions have maintained a small but steady share of the market since 2017, and after the implementation of the stress test credit unions gained an additional 17% in the Big-8 markets.

The market share picture changes when we look at the rest of Ontario. While the Big-5 still maintain a strong share of the mortgages outside of Ontario’s biggest markets, it isn’t as large as it is within the Big-8. In these smaller markets, the Big-5 saw a reduction of their market share in 2018. Credit unions only have about 3% of the market share in the Big-8 but in the smaller markets they saw an 8.6% increase. Private lenders also made strong progress in these markets and have grown from 4.8% to over 6% in just three years.

No study about Ontario mortgage markets is complete without at least a glance at Toronto – with 22% of the entire market of Ontario, it is just too big to ignore. Here we see a similar trend emerge with Big-5 share decreasing and credit unions and private lenders increasing share.

PERCENTAGE OF MARKET BY MORTGAGE VALUELender

Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 73.6% 72.9% 73.9% 74.6% 75.0% 77.0% 74.0%

Credit Union 2.3% 2.7% 2.9% 2.9% 3.0% 2.9% 3.5%

Private Lenders 3.9% 4.1% 4.4% 4.3% 4.9% 6.2% 7.2%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 71.4% 70.6% 71.9% 72.2% 72.1% 73.5% 71.3%

Credit Union 6.3% 7.4% 7.4% 7.3% 7.6% 7.7% 8.6%

Private Lenders 4.9% 4.8% 5.1% 4.7% 4.8% 5.4% 6.1%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 74.0% 73.4% 73.5% 74.5% 74.9% 77.0% 74.0%

Credit Union 2.0% 2.4% 2.7% 2.5% 2.6% 2.5% 2.9%

Private Lenders 4.2% 4.7% 5.2% 5.0% 5.8% 7.6% 8.9%

Other Banks 10.4% 8.1% 8.7% 8.9% 8.1% 7.7% 8.7%

BIG 8 ONTARIO MARKETS

NON-BIG 8 ONTARIO MARKETS

TORONTO

Source: Teranet

Source: Teranet

Source: Teranet

How do demographics come into play? We further investigated the mix of diff erent age groups in various lender groups, with a goal to identify if certain lenders are able to capture and cater to specifi c age groups better than the others.

In order to see the role demographics play in market share we looked at the following age groups: Traditionalist (74-94 yrs.), Baby Boomers (55-73 yrs.), Generation X (40-54 yrs.), Millennials (25-39 yrs.) and Generation Z (4-24 yrs.)

Hamilton

TorontoBramptonOakville

Mississauga VaughanMarkham

Ottawa

BIG-8 MARKETS

Page 3: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

MARKET INSIGHTS | MARCH 2019MARKET INSIGHTS | MARCH 2019

In the table below we highlight major changes in market share between 2017 and 2018. The Big-5 have traditionally had around 73% of the market, however, in 2018 saw a reduction of 2.7% in their share. This gain went to credit unions, private lenders and trust companies, with each increasing market share by about 0.8%.

The impact by geographyA closer look at these three lender groups shows that credit unions and private lenders have been consistently growing since 2016 and have made some impressive gains in almost all geographic regions.

These results point to two possible outcomes caused by the stress test: fi rstly, the Big-5 have been impacted negatively because more mortgagors are willing to switch their mortgage to another institution instead of refi nancing and renewing with their current bank. Secondly, the stress test rules don’t apply to the provincially regulated private lenders and credit unions, which has given them growth of nearly 1% market share in the fi rst year after the stress test was implemented.

We also looked at data from all mortgages registered in Ontario from January 2012 to December 2018 in specifi c regions.

Since 2012, the Big-5 have dominated the market and have consistently held onto a share greater than 72%. However, in 2018 after the stress test was implemented, the Big-5 lost 2.7% of their market share. There have been shifts amongst other lenders as well. Credit unions and private lenders have seen gains of almost 2%, but this can’t all be credited to the stress test. These two lender groups have had gains of over 45% of their share since 2012.

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Category 2012 2013 2014 2015 2016 2017 2018Percentage

Change 2012-2018

Big-5 72.5% 71.8% 73.0% 73.5% 73.7% 75.3% 72.6% 0.1%

Credit Union 4.2% 4.9% 5.0% 4.9% 5.1% 5.3% 6.1% 1.9%

Insurance Companies 0.5% 0.4% 0.4% 0.4% 0.4% 0.2% 0.2% -0.2%

Investment Firms 0.2% 0.3% 0.3% 0.4% 0.5% 0.5% 0.6% 0.4%

Monolines 3.2% 4.3% 2.5% 3.7% 3.6% 2.7% 2.7% -0.6%

Other Banks 8.9% 7.5% 7.7% 7.9% 7.1% 7.5% 7.7% -1.1%

Private Lenders 4.4% 4.4% 4.8% 4.5% 4.9% 5.8% 6.7% 2.3%

Trust Company 6.1% 6.4% 6.3% 4.8% 4.9% 2.7% 3.4% -2.7%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Groups 2016 2017 2018Percentage

Change 2017-2018

Big-5 73.7% 75.3% 72.6% -2.7%

Credit Union 5.1% 5.3% 6.1% 0.8%

Insurance Companies 0.4% 0.2% 0.2% 0.0%

Investment Firms 0.5% 0.5% 0.6% 0.1%

Monolines 3.6% 2.7% 2.7% 0.0%

Other Banks 7.1% 7.5% 7.7% 0.3%

Private Lenders 4.9% 5.8% 6.7% 0.8%

Trust Companies 4.9% 2.7% 3.4% 0.7%

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Retention declines post stress testThe fi rst thing that stands out is the drop in mortgage refi nance and switch activity. The market has seen a drop of nearly 24%, or over 50,000 mortgages in just one year. This may be due to mortgagors staying through their term and not exploring options for a refi nance or switch as aggressively as they may have done before.

Further, when we look at the percentage composition of mortgage refi nance and switches, a surprising pattern comes up. In 2018, the percentage of total non-purchase mortgages refi nanced or switched fell by nearly 6%, in a year when it may have been expected to rise due to the stress test. This comes on the back of a rising trend from 2016-2017, when refi nances captured 54.6% of total mortgages in Ontario.

A 24% fall in total number of mortgage refi nance and switches in 2017-2018 and a fall in the percentage of mortgage refi nance and subsequent rise in the percentage of mortgage switches illustrates two impacts of the stress test:

1. Mortgagors were willing to wait out the term of their mortgage in order to potentially avoid new terms as a result of the stress test from their current lenders.

2. Many existing mortgagors were not impacted by the stress test as evidenced by higher percentage of switches.

With switches increasing and mortgagors being more willing to shop around, we wanted to take a deeper look at where the switches were going. For this we looked at the switch-out (the lender whom the mortgagor has shifted their mortgage from) and the switch-in (the lender whom the mortgagor has shifted their mortgage to) data from January 2016 to December 2018. We concentrated on two blocks of lenders: Big-5 and Others.

From January 2016 to December 2018 some interesting trends took place that show a weakening position for the Big-5 banks.

First, mortgage switches in favor of Big-5 from Others fell by 5.5% from 59.9% in 2017 to 54.5% in 2018 or a drop of 8,000 switches. Second, mortgage switches in favor of Others over Big-5 increased by from 32.2% in 2017 to 34.3% in 2018. This, combined with the fact that the Big-5 have lost nearly 3% market share, point to the stress test negatively impacting the Big-5.

If the Big-5 is losing, who is gaining from the stress test? To answer this question we looked at data across all Ontario lender groups (Big-5, credit unions, insurance companies, investment fi rms, monolines, other banks, private lenders and trust companies) from January 2016 to December 2018.

REFINANCE AND SWITCH PERCENTAGE

SWITCH-OUT

2017 2018

SWITCH-IN Big-5 Others Big-5 Others

Big-5 40.1%18,815

59.9%28,159

45.4%17,073

54.5%20,531

Other 32.2%15,175

67.8%31,953

34.3%14,588

65.6%27,881

Source: Teranet

Source: Teranet

When we look at a market share from a regional perspective there’s a clear distinction between the Big-8 Ontario markets (see map below) and the rest of Ontario. The Big-5 banks have remained popular in the bigger Ontario markets and made signifi cant increases in 2017. Private lenders have also gained popularity in these markets since 2016. In fact, private lenders have grown by about 84% in the past seven years in Ontario’s biggest markets. Credit unions have maintained a small but steady share of the market since 2017, and after the implementation of the stress test credit unions gained an additional 17% in the Big-8 markets.

The market share picture changes when we look at the rest of Ontario. While the Big-5 still maintain a strong share of the mortgages outside of Ontario’s biggest markets, it isn’t as large as it is within the Big-8. In these smaller markets, the Big-5 saw a reduction of their market share in 2018. Credit unions only have about 3% of the market share in the Big-8 but in the smaller markets they saw an 8.6% increase. Private lenders also made strong progress in these markets and have grown from 4.8% to over 6% in just three years.

No study about Ontario mortgage markets is complete without at least a glance at Toronto – with 22% of the entire market of Ontario, it is just too big to ignore. Here we see a similar trend emerge with Big-5 share decreasing and credit unions and private lenders increasing share.

PERCENTAGE OF MARKET BY MORTGAGE VALUELender

Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 73.6% 72.9% 73.9% 74.6% 75.0% 77.0% 74.0%

Credit Union 2.3% 2.7% 2.9% 2.9% 3.0% 2.9% 3.5%

Private Lenders 3.9% 4.1% 4.4% 4.3% 4.9% 6.2% 7.2%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 71.4% 70.6% 71.9% 72.2% 72.1% 73.5% 71.3%

Credit Union 6.3% 7.4% 7.4% 7.3% 7.6% 7.7% 8.6%

Private Lenders 4.9% 4.8% 5.1% 4.7% 4.8% 5.4% 6.1%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 74.0% 73.4% 73.5% 74.5% 74.9% 77.0% 74.0%

Credit Union 2.0% 2.4% 2.7% 2.5% 2.6% 2.5% 2.9%

Private Lenders 4.2% 4.7% 5.2% 5.0% 5.8% 7.6% 8.9%

Other Banks 10.4% 8.1% 8.7% 8.9% 8.1% 7.7% 8.7%

BIG 8 ONTARIO MARKETS

NON-BIG 8 ONTARIO MARKETS

TORONTO

Source: Teranet

Source: Teranet

Source: Teranet

How do demographics come into play? We further investigated the mix of diff erent age groups in various lender groups, with a goal to identify if certain lenders are able to capture and cater to specifi c age groups better than the others.

In order to see the role demographics play in market share we looked at the following age groups: Traditionalist (74-94 yrs.), Baby Boomers (55-73 yrs.), Generation X (40-54 yrs.), Millennials (25-39 yrs.) and Generation Z (4-24 yrs.)

Hamilton

TorontoBramptonOakville

Mississauga VaughanMarkham

Ottawa

BIG-8 MARKETS

Page 4: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

MARKET INSIGHTS | MARCH 2019MARKET INSIGHTS | MARCH 2019

In the table below we highlight major changes in market share between 2017 and 2018. The Big-5 have traditionally had around 73% of the market, however, in 2018 saw a reduction of 2.7% in their share. This gain went to credit unions, private lenders and trust companies, with each increasing market share by about 0.8%.

The impact by geographyA closer look at these three lender groups shows that credit unions and private lenders have been consistently growing since 2016 and have made some impressive gains in almost all geographic regions.

These results point to two possible outcomes caused by the stress test: fi rstly, the Big-5 have been impacted negatively because more mortgagors are willing to switch their mortgage to another institution instead of refi nancing and renewing with their current bank. Secondly, the stress test rules don’t apply to the provincially regulated private lenders and credit unions, which has given them growth of nearly 1% market share in the fi rst year after the stress test was implemented.

We also looked at data from all mortgages registered in Ontario from January 2012 to December 2018 in specifi c regions.

Since 2012, the Big-5 have dominated the market and have consistently held onto a share greater than 72%. However, in 2018 after the stress test was implemented, the Big-5 lost 2.7% of their market share. There have been shifts amongst other lenders as well. Credit unions and private lenders have seen gains of almost 2%, but this can’t all be credited to the stress test. These two lender groups have had gains of over 45% of their share since 2012.

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Category 2012 2013 2014 2015 2016 2017 2018Percentage

Change 2012-2018

Big-5 72.5% 71.8% 73.0% 73.5% 73.7% 75.3% 72.6% 0.1%

Credit Union 4.2% 4.9% 5.0% 4.9% 5.1% 5.3% 6.1% 1.9%

Insurance Companies 0.5% 0.4% 0.4% 0.4% 0.4% 0.2% 0.2% -0.2%

Investment Firms 0.2% 0.3% 0.3% 0.4% 0.5% 0.5% 0.6% 0.4%

Monolines 3.2% 4.3% 2.5% 3.7% 3.6% 2.7% 2.7% -0.6%

Other Banks 8.9% 7.5% 7.7% 7.9% 7.1% 7.5% 7.7% -1.1%

Private Lenders 4.4% 4.4% 4.8% 4.5% 4.9% 5.8% 6.7% 2.3%

Trust Company 6.1% 6.4% 6.3% 4.8% 4.9% 2.7% 3.4% -2.7%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Groups 2016 2017 2018Percentage

Change 2017-2018

Big-5 73.7% 75.3% 72.6% -2.7%

Credit Union 5.1% 5.3% 6.1% 0.8%

Insurance Companies 0.4% 0.2% 0.2% 0.0%

Investment Firms 0.5% 0.5% 0.6% 0.1%

Monolines 3.6% 2.7% 2.7% 0.0%

Other Banks 7.1% 7.5% 7.7% 0.3%

Private Lenders 4.9% 5.8% 6.7% 0.8%

Trust Companies 4.9% 2.7% 3.4% 0.7%

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Retention declines post stress testThe fi rst thing that stands out is the drop in mortgage refi nance and switch activity. The market has seen a drop of nearly 24%, or over 50,000 mortgages in just one year. This may be due to mortgagors staying through their term and not exploring options for a refi nance or switch as aggressively as they may have done before.

Further, when we look at the percentage composition of mortgage refi nance and switches, a surprising pattern comes up. In 2018, the percentage of total non-purchase mortgages refi nanced or switched fell by nearly 6%, in a year when it may have been expected to rise due to the stress test. This comes on the back of a rising trend from 2016-2017, when refi nances captured 54.6% of total mortgages in Ontario.

A 24% fall in total number of mortgage refi nance and switches in 2017-2018 and a fall in the percentage of mortgage refi nance and subsequent rise in the percentage of mortgage switches illustrates two impacts of the stress test:

1. Mortgagors were willing to wait out the term of their mortgage in order to potentially avoid new terms as a result of the stress test from their current lenders.

2. Many existing mortgagors were not impacted by the stress test as evidenced by higher percentage of switches.

With switches increasing and mortgagors being more willing to shop around, we wanted to take a deeper look at where the switches were going. For this we looked at the switch-out (the lender whom the mortgagor has shifted their mortgage from) and the switch-in (the lender whom the mortgagor has shifted their mortgage to) data from January 2016 to December 2018. We concentrated on two blocks of lenders: Big-5 and Others.

From January 2016 to December 2018 some interesting trends took place that show a weakening position for the Big-5 banks.

First, mortgage switches in favor of Big-5 from Others fell by 5.5% from 59.9% in 2017 to 54.5% in 2018 or a drop of 8,000 switches. Second, mortgage switches in favor of Others over Big-5 increased by from 32.2% in 2017 to 34.3% in 2018. This, combined with the fact that the Big-5 have lost nearly 3% market share, point to the stress test negatively impacting the Big-5.

If the Big-5 is losing, who is gaining from the stress test? To answer this question we looked at data across all Ontario lender groups (Big-5, credit unions, insurance companies, investment fi rms, monolines, other banks, private lenders and trust companies) from January 2016 to December 2018.

REFINANCE AND SWITCH PERCENTAGE

SWITCH-OUT

2017 2018

SWITCH-IN Big-5 Others Big-5 Others

Big-5 40.1%18,815

59.9%28,159

45.4%17,073

54.5%20,531

Other 32.2%15,175

67.8%31,953

34.3%14,588

65.6%27,881

Source: Teranet

Source: Teranet

When we look at a market share from a regional perspective there’s a clear distinction between the Big-8 Ontario markets (see map below) and the rest of Ontario. The Big-5 banks have remained popular in the bigger Ontario markets and made signifi cant increases in 2017. Private lenders have also gained popularity in these markets since 2016. In fact, private lenders have grown by about 84% in the past seven years in Ontario’s biggest markets. Credit unions have maintained a small but steady share of the market since 2017, and after the implementation of the stress test credit unions gained an additional 17% in the Big-8 markets.

The market share picture changes when we look at the rest of Ontario. While the Big-5 still maintain a strong share of the mortgages outside of Ontario’s biggest markets, it isn’t as large as it is within the Big-8. In these smaller markets, the Big-5 saw a reduction of their market share in 2018. Credit unions only have about 3% of the market share in the Big-8 but in the smaller markets they saw an 8.6% increase. Private lenders also made strong progress in these markets and have grown from 4.8% to over 6% in just three years.

No study about Ontario mortgage markets is complete without at least a glance at Toronto – with 22% of the entire market of Ontario, it is just too big to ignore. Here we see a similar trend emerge with Big-5 share decreasing and credit unions and private lenders increasing share.

PERCENTAGE OF MARKET BY MORTGAGE VALUELender

Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 73.6% 72.9% 73.9% 74.6% 75.0% 77.0% 74.0%

Credit Union 2.3% 2.7% 2.9% 2.9% 3.0% 2.9% 3.5%

Private Lenders 3.9% 4.1% 4.4% 4.3% 4.9% 6.2% 7.2%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 71.4% 70.6% 71.9% 72.2% 72.1% 73.5% 71.3%

Credit Union 6.3% 7.4% 7.4% 7.3% 7.6% 7.7% 8.6%

Private Lenders 4.9% 4.8% 5.1% 4.7% 4.8% 5.4% 6.1%

PERCENTAGE OF MARKET BY MORTGAGE VALUE

Lender Segment 2012 2013 2014 2015 2016 2017 2018

Big-5 74.0% 73.4% 73.5% 74.5% 74.9% 77.0% 74.0%

Credit Union 2.0% 2.4% 2.7% 2.5% 2.6% 2.5% 2.9%

Private Lenders 4.2% 4.7% 5.2% 5.0% 5.8% 7.6% 8.9%

Other Banks 10.4% 8.1% 8.7% 8.9% 8.1% 7.7% 8.7%

BIG 8 ONTARIO MARKETS

NON-BIG 8 ONTARIO MARKETS

TORONTO

Source: Teranet

Source: Teranet

Source: Teranet

How do demographics come into play? We further investigated the mix of diff erent age groups in various lender groups, with a goal to identify if certain lenders are able to capture and cater to specifi c age groups better than the others.

In order to see the role demographics play in market share we looked at the following age groups: Traditionalist (74-94 yrs.), Baby Boomers (55-73 yrs.), Generation X (40-54 yrs.), Millennials (25-39 yrs.) and Generation Z (4-24 yrs.)

Hamilton

TorontoBramptonOakville

Mississauga VaughanMarkham

Ottawa

BIG-8 MARKETS

Page 5: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

For Media Inquiries, please contact: Emily Boyce, Teranet [email protected]

For more information about the data presented in this publication, please contact: Kan ZhuLeader, Data & Advisory SolutionsTeranet [email protected]

MARKET INSIGHTS | MARCH 2019

We investigated the market share of various lender segments within these demographic categories for the past three years and saw some interesting trends emerge.

Consider the fi gures for 2018, the Traditionalists have 76% of their mortgages with the Big-5, Baby Boomers have 74% (a drop of 2%), Generation X have 71% (a drop of another 3%), Millennials have 69% (another drop of 2%), and Generation Z have just 56% (a drop of 13%).

Credit unions have increased market share with nearly all segments and have Millennials as the third highest market segment (based on percentage). The fact that the Millennial segment has increased 85% since 2012 and is the emerging home buyer demographic, may bode well for credit unions if we see these trends continue.

As new generations emerge and enter the mortgage market, it will be interesting to see the shifts in buying behavior, lender loyalty and expectations when it comes to mortgages in Ontario. The Teranet Market Insights Report will continue to monitor these trends and report on their signifi cance to the real estate and fi nancial services community.

80%

78%

76%

74%

72%

70%

68%

66%

64%

62%

60%

58%

56%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

78%77%

76%76%

75%74%

73% 72% 73%74%

74%

71%

69%

67%67%

66%

68%68%

73%

69%69%69%70%

68%

80%

74%

71%

63%

56%

68%

75%

73%

76%

2012 2013 2014 2015 2016 2017 2018

4%

3%

2%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

3.7%3.7%

3.3%

2.9%2.9%2.8%

3.2% 3.2%3.1%

2.9%

2.4%

2.6%

2.4%

1.9%

1.9%

2.7%

3.1%

3.5%

4.6%

4.2%4.2%

3.6%

3.6%

2.2%

1.3%

1.9%

4.0%

2.2%

1.4%

4.1%

3.1%

2012 2013 2014 2015 2016 2017 2018

YEAR

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

BIG-5 BY AGE GROUP

CREDIT UNION BY AGE GROUP

Source: Teranet

Source: Teranet

For more information about Teranet Solutions, please contact:

[email protected]@teranet.ca [email protected] [email protected] [email protected]

[email protected]

British [email protected]

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

We are pleased to share with you the fi fth edition of the Teranet Market Insights Report. This report delivers a comprehensive analysis and new insights on the real estate market in Ontario and includes data compiled by our data scientists.

In this edition, we’re focusing on the impact of the stress test implemented in 2018. We’ll explore how it aff ected mortgage activity and the market share of Ontario’s banks and lenders. This report will look at data from the past seven years and analyze demographic information.

The impact of the stress testIt has been over a year since the Offi ce of the Superintendent of Financial Institutions (OSFI) published revisions to the B-20 Guideline. The biggest change was the implementation of a 2% stress test on all uninsured mortgages. This means that when mortgagors apply for a mortgage from a federally regulated lender, they will have their fi nances “stress tested” to ensure they would still be able to pay off the loan if rates were 2% higher. As a result of this, an average home buyer saw the mortgage amount they could qualify for cut by 20%. A mortgagor that would have qualifi ed for a $700,000 mortgage prior to the stress test would now only be able to qualify for a $560,000 mortgage (assuming there are similar terms, rates, etc.).

These changes are not applicable to mortgagors renewing their mortgage with the same lender, which would lead one to assume that mortgage refi nances1 would have become more popular than mortgage switches2 before or at the time of expiry of the mortgage term. However, this was not the case.

To gauge customer activity around a decision to refi nance or switch, we created an analysis of all refi nances and switches in Ontario from January 2016 to December 2018.

MARKET INSIGHTSTHE CANADIAN SOURCE FOR HOUSING INFORMATION | MARCH 2019

©TERANET. ALL RIGHTS RESERVED.1.855.787.8439 | [email protected] | teranet.ca

¹ a renewal or new mortgage to replace the original from the same lender and where a transfer of sale has not taken place² a new mortgage to replace the original from a diff erent lender and where a transfer of sale has not taken place

REFINANCE AND SWITCH VOLUME

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Millennials narrowly have the majority of the market with 35.6%, just surpassing Generation X who have 34.2%. Baby Boomers, no longer the dominant share, represent just 23% of the mortgage market. We’ve also seen the emergence of Generation Z in the mortgage market, and while they don’t represent a big piece of the market yet, they will be an interesting demographic to watch.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

PERC

ENTA

GE

OF

REG

ISTE

RED

VAL

UE

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Baby BoomersGeneration XGeneration Z Millenials Traditionalists

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

73.9

%

71.2

%

3.2%

8.8%

5.6%

11.1

%

55.9

%

69.4

% 75.7

%

2.2%

16.7

% 21.3

%

3.9%

3.5% 8.

3%

5.7%

13.1

%

4.6% 7.

3%

6.4%

6.2%

3.7%

8.0%

6.1% 8.

3%

Highest PrivateLender Percentage

21%

DEMOGRAPHIC BREAKUP OF ONTARIO’S MORTGAGE MARKET

6.5%Traditionalists

23.4%Baby Boomers

34.2%Generation X

0.4%Generation Z

35.6%Millenials

CATEGORY

Baby BoomersGeneration XMillenialsGeneration Z

Traditionalists

DEMOGRAPHICS

Source: Teranet

Source: Teranet

Generation ZBorn 1997-Present

(4-24 years old)

MillennialsBorn 1981-1996(25-39 years old)

Generation XBorn 1965-1980(40-54 years old)

Baby BoomersBorn 1946-1964(55-73 years old)

TraditionalistsBorn 1928-1945(74-94 years old)

Page 6: Teranet Market Insight Feb2019ci23.actonsoftware.com/acton/attachment/2216/f-aee8a670-3392-4f… · Ontario. The Teranet Market Insights Report will continue to monitor these trends

For Media Inquiries, please contact: Emily Boyce, Teranet [email protected]

For more information about the data presented in this publication, please contact: Kan ZhuLeader, Data & Advisory SolutionsTeranet [email protected]

MARKET INSIGHTS | MARCH 2019

We investigated the market share of various lender segments within these demographic categories for the past three years and saw some interesting trends emerge.

Consider the fi gures for 2018, the Traditionalists have 76% of their mortgages with the Big-5, Baby Boomers have 74% (a drop of 2%), Generation X have 71% (a drop of another 3%), Millennials have 69% (another drop of 2%), and Generation Z have just 56% (a drop of 13%).

Credit unions have increased market share with nearly all segments and have Millennials as the third highest market segment (based on percentage). The fact that the Millennial segment has increased 85% since 2012 and is the emerging home buyer demographic, may bode well for credit unions if we see these trends continue.

As new generations emerge and enter the mortgage market, it will be interesting to see the shifts in buying behavior, lender loyalty and expectations when it comes to mortgages in Ontario. The Teranet Market Insights Report will continue to monitor these trends and report on their signifi cance to the real estate and fi nancial services community.

80%

78%

76%

74%

72%

70%

68%

66%

64%

62%

60%

58%

56%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

78%77%

76%76%

75%74%

73% 72% 73%74%

74%

71%

69%

67%67%

66%

68%68%

73%

69%69%69%70%

68%

80%

74%

71%

63%

56%

68%

75%

73%

76%

2012 2013 2014 2015 2016 2017 2018

4%

3%

2%

PERC

ENTA

GE

OF

MO

RTG

AGE

MAR

KET

SEG

MEN

TATI

ON

BY

AGE-

GRO

UP

3.7%3.7%

3.3%

2.9%2.9%2.8%

3.2% 3.2%3.1%

2.9%

2.4%

2.6%

2.4%

1.9%

1.9%

2.7%

3.1%

3.5%

4.6%

4.2%4.2%

3.6%

3.6%

2.2%

1.3%

1.9%

4.0%

2.2%

1.4%

4.1%

3.1%

2012 2013 2014 2015 2016 2017 2018

YEAR

AGE GROUPBaby BoomersGeneration XGeneration Z Millennials Traditionalists

BIG-5 BY AGE GROUP

CREDIT UNION BY AGE GROUP

Source: Teranet

Source: Teranet

For more information about Teranet Solutions, please contact:

[email protected]@teranet.ca [email protected] [email protected] [email protected]@teranet.ca

Ottawa/Qué[email protected]

Western [email protected]

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

teranet.caThe Teranet-National Bank Composite House Price IndexTM is trademark of Teranet Enterprises Inc. and National Bank of Canada. All other trademarks and trade names are the property of their respective owners. All data is provided on an as is basis. © TERANET. ALL RIGHTS RESERVED.

We are pleased to share with you the fi fth edition of the Teranet Market Insights Report. This report delivers a comprehensive analysis and new insights on the real estate market in Ontario and includes data compiled by our data scientists.

In this edition, we’re focusing on the impact of the stress test implemented in 2018. We’ll explore how it aff ected mortgage activity and the market share of Ontario’s banks and lenders. This report will look at data from the past seven years and analyze demographic information.

The impact of the stress testIt has been over a year since the Offi ce of the Superintendent of Financial Institutions (OSFI) published revisions to the B-20 Guideline. The biggest change was the implementation of a 2% stress test on all uninsured mortgages. This means that when mortgagors apply for a mortgage from a federally regulated lender, they will have their fi nances “stress tested” to ensure they would still be able to pay off the loan if rates were 2% higher. As a result of this, an average home buyer saw the mortgage amount they could qualify for cut by 20%. A mortgagor that would have qualifi ed for a $700,000 mortgage prior to the stress test would now only be able to qualify for a $560,000 mortgage (assuming there are similar terms, rates, etc.).

These changes are not applicable to mortgagors renewing their mortgage with the same lender, which would lead one to assume that mortgage refi nances1 would have become more popular than mortgage switches2 before or at the time of expiry of the mortgage term. However, this was not the case.

To gauge customer activity around a decision to refi nance or switch, we created an analysis of all refi nances and switches in Ontario from January 2016 to December 2018.

MARKET INSIGHTSTHE CANADIAN SOURCE FOR HOUSING INFORMATION | MARCH 2019

©TERANET. ALL RIGHTS RESERVED.1.855.787.8439 | [email protected] | teranet.ca

¹ a renewal or new mortgage to replace the original from the same lender and where a transfer of sale has not taken place² a new mortgage to replace the original from a diff erent lender and where a transfer of sale has not taken place

REFINANCE AND SWITCH VOLUME

Source: Teranet

MARKET INSIGHTS | MARCH 2019

Millennials narrowly have the majority of the market with 35.6%, just surpassing Generation X who have 34.2%. Baby Boomers, no longer the dominant share, represent just 23% of the mortgage market. We’ve also seen the emergence of Generation Z in the mortgage market, and while they don’t represent a big piece of the market yet, they will be an interesting demographic to watch.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

PERC

ENTA

GE

OF

REG

ISTE

RED

VAL

UE

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Baby BoomersGeneration XGeneration Z Millenials Traditionalists

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

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pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

Big

5

Cred

it U

nion

Oth

er B

anks

Priv

ate

Lend

ers

Trus

t Com

pany

73.9

%

71.2

%

3.2%

8.8%

5.6%

11.1

%

55.9

%

69.4

% 75.7

%

2.2%

16.7

% 21.3

%

3.9%

3.5% 8.

3%

5.7%

13.1

%

4.6% 7.

3%

6.4%

6.2%

3.7%

8.0%

6.1% 8.

3%

Highest PrivateLender Percentage

21%

DEMOGRAPHIC BREAKUP OF ONTARIO’S MORTGAGE MARKET

6.5%Traditionalists

23.4%Baby Boomers

34.2%Generation X

0.4%Generation Z

35.6%Millenials

CATEGORY

Baby BoomersGeneration XMillenialsGeneration Z

Traditionalists

DEMOGRAPHICS

Source: Teranet

Source: Teranet

Generation ZBorn 1997-Present

(4-24 years old)

MillennialsBorn 1981-1996(25-39 years old)

Generation XBorn 1965-1980(40-54 years old)

Baby BoomersBorn 1946-1964(55-73 years old)

TraditionalistsBorn 1928-1945(74-94 years old)

Teranet_Market_Insight_Feb2019.indd 1 2019-03-04 2:15 PM