Focus on Mortgages:
The March 19thFederal Budget looked to stimulate the housing market for first time home buyers by offering an interest-free loan of up to 10% of the mortgage amount repayable upon sale of the home. This is reflective of the impact of house price appreciation, increasing interest rates and tightening mortgage approval criteria on home ownership affordability.
This month we look at the mortgage market size and growth trends across Canada as well as the market share winners and losers.
- This table shows the total bank and credit union market by region (excludes non-banks and off-balance sheet).
- Market growth is modest at 3.9%, much slower than the 5.7% average growth over 5 years. Ontario had the largest growth at 5.5%. Four areas saw growth of less than 3%.
- This chart shows running 12-month mortgage growth rate by region.
- While most regions have been on a declining trend since Q2’17, the declines are most evident in BC and Ontario which represent 62% of the national market. BC peaked at 9.0% growth in Q4’17 declining to 4.5% by Q4’18. Ontario peaked at 8.2% Q2’17 declining to 5.5% by Q4’18. Q4’18 saw growth rate improvements in all markets except BC and Ontario.
- Banks have lost 109BP of mortgage market share over the last 5 years. This is reflective of decreasing participation in the mortgage broker channel and pricing that is less aggressive than credit unions and non-banks.
- Credit Unions have been the main beneficiary of the share growth. Increased participation in the broker channel and more aggressive, transparent pricing is driving credit union share growth.
- Non-Banks were a major driver of growth; however, growth has slowed in recent quarters reflecting quality problems in near prime broker channel (Home Capital for example) and perhaps decreasing access to funding.
- This table shows January 2019 balances, share and 3, 12- and 16-month changes in share for the largest bank and non-bank market participants.
- Over 5 years, Equitable Bank, Canadian Western Bank and Manulife Bank have posted share gains of 48% or more. Over 12 months, Home Trust is showing some resurgence joining these banks among the share growth leaders.
- Royal Bank is the only top 7 bank to have improved share over the last 12 months. (TDCT Share is misleading because they classify some of their mortgage portfolio as personal loans).
- The largest share declines over 5 years were Home Trust (broker channel near prime quality issues), Scotiabank (Tangerine exited the broker channel) and Laurentian (quality issues).
- While it may be timely for the government to introduce assistance for first time homeowners, it is unlikely to have material impact on the market overall.
- We believe we are seeing a return to normal growth after a period if excessive price inflation in Ontario and BC and the dampening effects of rising interest rates.