Canada

Canada’s Big 5 Banks Lose Mortgage Market Share… Kind Of

Canadian real estate buyers are increasingly using non-Big 5 lenders… sort of. Teranet, the country’s largest land registry operator, crunched the numbers for Ontario. In 2018, Canada’s Big 5 banks lost a considerable share of the market compared to the year before. However, looking at a period of longer than a year, their market share has been relatively stable.

Canada’s Big 5 Banks Lose Over 2 Points of The Mortgage Market

Credit unions, private lenders, and trust companies picked up market share from the Big 5 in Ontario. The Big 5 held 72.6% of market share in 2018, down 2.7 points from the year before. Private lenders were tied for biggest gains of that market share, now holding 6.7% of mortgages – picking up 0.8 points. Credit unions increased their market share to 6.1%, also picking up 0.8 points. Trust companies followed the gains with 3.4% of the market, a rise of 0.7 points from the year before. In the short-run, it appears that banks lost a huge share due to short-term changes to regulations.

Canadian Lender Market Share By Value (Ontario, 2017 – 2018)

The change in market share held by value of mortages in Ontario, from 2017 to 2018.

Source: Teranet, Better Dwelling.

Over The Long Run, Things Didn’t Really Change For The Big 5

Over a longer-period, the Big 5’s market share is actually holding still. From 2012 to 2018, the Big 5 experienced a 0.1 point gain – basically maintaining their position. Private lenders made the largest gain, 2.3 points over the same period. Credit unions saw a rise of 1.9 points over the same period. Investment firms round out the top three gains, with 0.4 points added to their portfolio. The trend towards non-Big 5 lenders has been occurring much longer than the short-term impact of regulation changes.

Canadian Lender Market Share Change By Value (Ontario, 2012 – 2018)

The change in market share held by value of mortages in Ontario, from 2012 to 2018.

Source: Teranet, Better Dwelling.

If the Big 5 didn’t lost market share over the long run, who did? Trust companies may have lost the biggest share over that period, dropping 2.7 points of market share. Non-Big 5 banks lost the second most, shedding 1.1 points of the market. Monoline lenders lost another 0.6 points. Insurance companies don’t represent a lot of mortgages, but they lost 0.2 points over the six year period.

The B-20 Guidelines rolled out did have an impact, but it was far from the only contributor. Borrowers have been increasingly turning to non-Big 5 lenders over the past few years. In fact, Teranet data shows the private lending space made just a third of the gains post-B-20. The decline may have less to do with regulations, and more to do with a change in the way Canadians are financing.

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21 Comments

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  • Ethan Wu 6 months ago

    Interesting lesson about Ontario’s appetite for risk. Post B-20 only represents 34% of the increase of their market share gain? Who was paying 8% mortgages before regulators asked banks to properly assess risk.

    • Aaron 6 months ago

      Also none of the banks are saying B-20 is an issue as far as I know, just real estate agents and boards.

      • LL 5 months ago

        Not really. There are very active discussions now for both 30y mortgages and B20. And you are in a losing team.
        Just last month:
        1)BC finance minister (NDP) said B20 is awesome, affordability improved, let’s keep going this way, we wanted it.
        2)Data for contracting GDP came out for December and Fed Liberals, especially Morneau started talking about 30y insured mortgages to support the economy
        3)President of CMHC posted The Star article against B20 softening and 30y mortgages and exactly same day TREB posted February report demanding 30y mortgages
        4)OSFI said it never intended to cool housing market and change affordability by any measure, but only improve underwriting standards, obviously opposing to CMHC and sending a message that B20 can be reviewed and modified if housing number will keep look bad.

        As a result:
        -30y mortgages in the next budget time: almost a certainty.
        -B20 modification, hard to assess chances, but last week they improved

  • Mica 6 months ago

    All industries will complain that they’re the victim of regulation if there’s any slowdown or profits can be increased. This is why we need stronger, more ethical government on all levels – not just corporate lobby shills.

  • Sarah 6 months ago

    Something curious I just noticed…take a look at TREB’s recent Market Watch, for February 2019.

    On the last page, with the historical annual statistics, it seems that 2017 has been omitted?

    It shows:
    2014 $566,624
    2015 $622,121
    2016 $729,837

    Then it jumps to the monthly breakdown of 2018, with the overall annual average of $787,175.

    But where is 2017, which should show an average price of $822,587?

    I know they say you should never attribute to malice that which is explained by stupidity, but this is TREB we’re talking about here…

  • Al Daimee 6 months ago

    As a realtor, many of us in the industry see B20 as not a bad thing nor should it be removed. Preventing buyers from getting into financial trouble is something we never want to see. There are always exceptions where B20 is punitive and, so alternate changes are needed to enable first time buyers to enter the market.

    Given the BoC’s revised stance on interest rate hikes plus the drop in bond yields, we may be seeing fixed mortgage interest rates drop as banks try to increase their share of the mortgage business. If that happens, expect an uptick in activity and prices, especially for the entry-level condos (sub-$650K in Downtown Toronto).

    • Investor 6 months ago

      You seem to contradict yourself. I’m not really sure how you rationalize $650k condos as entry-level that first time buyers should all embrace. That is exactly what B20 was meant to prevent. It’s not so much about folks not being allowed to get into the market, but rate of growth of prices outpacing income – Don’t you get it?

      Since when has $650k condo been normalized as entry-level? Everyone should be outraged because it’s unsustainable and something is going to hit the fan soon. It’s just a matter of time.

      • John 6 months ago

        It’s like the electric car credit if you believe we live in a capitalist world.

        Electric cars are priced based on the value after the credit is applied from the government. That is, a $30,000 car with a $10,000 credit is priced at $40,000 so the consumer still ultimately pays full price for the car. However the car manufacturer capitalizes on the opportunity to increase profit.

        The housing market is the same. We all believe first time buyers are victims that need to be helped into buying a home. Do you really think all these credits aren’t priced into the market? A first time buyer who is offered $300,000 by the bank, and has $50,000 in RRSP money to apply to the HBP is now looking at homes for $350,000 (plus down payment) because that is what’s “affordable”.

        First time home buyers are victims by being helped into unaffordable housing. Not by being priced out. Let the free market work and price the first time home buyers out, because at some point they will no longer be priced out.

    • Tim Hodson 6 months ago

      “As a realtor…Preventing buyers from getting into financial trouble is something we never want to see.”

      OP’s words, not mine.

    • george 5 months ago

      “I became the Realtor® that I wish I had when making my first purchase”
      — Al Daimee

      No wonder nobody believes realtor’s BS anymore….

  • Investor 6 months ago

    I don’t give a **whatever** if they lose market share! They played a role in creating the problem on ground, but the government/taxpayers always get their back if they hit their foot on the stone.

  • Lurkosaur 6 months ago

    “Canadian real estate buyers are increasingly using non-Big 5 lenders… sort of. Teranet, the country’s largest land registry operator, crunched the numbers for Ontario. ”

    Not sure if I sound like I’m nitpicking but I think it’s valid feedback:
    An Ontarian is a Canadian but the reverse isn’t always true and I think for a website that cares about data and facts, you shouldn’t mix these things too much.

  • Andrew Turner 6 months ago

    It appears to me that the Big 5 see risk in the mortgage market and are becoming more stringent in their approval process (beyond B-20); they are essentially skimming the cream off the top. It’s the tertiary markets such as private lenders that are picking up the less optimal market share. Yes they charge a premium, but is the true risk accurately baked into this increased rate? Are they the ones most exposed if a market correction were to happen?

  • DB 5 months ago

    I agree with Andrew..The big 5 are where they are with less market share because they will not take on the risk the small lender is willing to take..Don’t forget market share is just a word to them… its their business model to only take on as less risk as possible (quality over quantity)..it has to make sense to them. if the house of cards is to fall they need an escape plan,,plan “B” if they are to survive into the next recession.

  • Rana 5 months ago

    All lenders except big banks going to lose their pants so does re investors

  • Sophie 5 months ago

    Real estate agents became so greedy in the past 10 years that even a 0.5% drop in price scares them enormously.
    Most of them drive expensive cars for doing what??
    650000$ Showbox in downtown is considered entry level? What is the average salary in Ontario? Who is considered an entry-level buyer, 80% of the population?
    2017 was on purpose omitted because that was a year when naive people were offering 100-200k above the listed price as per the stupid suggestions from their agents.

  • Sophie 5 months ago

    Every time when I post , my post is removed , why?

  • Zenity 5 months ago

    I assure you banks are looking at this very closely. It’s better for big banks to tighten a little and offload these risks to private or alternative lender.

    Here are the fundamentals, Toronto does not lack land at all. Just do some simple math, google the area of Toronto multiply by residential usage let be very very conservative 30% (0.3) multiply by 2 (be very generous assume average 2 storey housing, we have tons of condos and townhouses) you get a very conservative estimate of residential space available for the population. and divide that by Toronto’s population. You will find there is enough land for 8000 square feet homes for everyone! There is no lack of land.

    Second, Toronto have no world leading company or industry. It’s not NYC or London or Scilicon Valley. Local income does not support nor justify these prices.

    third, these prices are very bad for the Canadian economy as a whole. Without actual income increase, these high housing levels is draining from all other industries. Real estate sector is low tech sector that does not help Canada to compete world wide. High housing costs also sends young talent to the states, you can’t build a world leading industry when you only have 40 plus home owners and retirees. Young people will realize we are taxing them to keep the boomers alive and slave over a mortgage to only benefit current home owners. All the smart ones will leave and your tax base shrinks. 10 years down the road everyone gets screwed.

  • SUMSKILLZ 5 months ago

    All I know is after four easy peasy renewals, this last one was almost as tough as a job interview. Quite the interrogation.

  • Joseph 5 months ago

    Honestly, I don’t get why people are still using the big 5 banks instead of other banks/lenders that offer much lower rates when getting a mortgage. The big 5 banks always quoted me rates that are at least 0.5% higher than what smaller banks/lenders are offering through a mortgage broker. (I am not talking about private lenders with their high rates but just smaller lenders/banks)

    This makes me feel that there are a lot of people in Canada that are not financially savvy and end up paying more for ‘convenience’.

  • Broker 5 months ago

    “Teranet data shows the private lending space made just a third of the gains post-B-20. The decline may have less to do with regulations, and more to do with a change in the way Canadians are financing.”

    Oh really? Why do you think Canadians are changing the way they finance? Do you think people LIKE paying significantly higher rates and fees at private lenders?? Ummm, no!

    Obviously, people are shifting to private lenders because they can’t get approved anymore at institutional lenders. Now I wonder if B-20 has anything to do with that [he asks rhetorically].

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