Canadian real estate prices were on a tear in 2016, and an increasing numbers of homeowners borrowed against that rise. Numbers from Equifax and the Canada Mortgage and Housing Corporation (CMHC) show an increase in multi-mortgage issuance in Canada’s fastest growing markets. That is, the number of people getting a second, third, or fourth mortgage on an already mortgaged residential homes, is on the rise. This could provide increasing evidence that the “bank of mom and dad” poured gas on last year’s buying frenzy.
Source: Equifax, CMHC.
Multiple Mortgage Holders
Multiple mortgage holders are just what they sound like. It’s when people attach more than one mortgage to the same address. In order to qualify for this prestigious honor, your home needs to have more than one mortgage on the property. To reduce skew from refinancing, the balance of that mortgage has to increase by at least 10%. These are homes where the owner rolled back the amount of equity they had. Either by borrowing more money against the home, or devaluation. The latter isn’t very likely in the time frame in cities like Toronto and Vancouver.
Source: Equifax, CMHC.
Toronto Real Estate
Toronto had large growth compared to most of Canada, just not BC cities. In 2016, 26,534 new homes applied for an additional mortgage, a 2.7% increase from the year before. The average debt from these borrowers is now $303,734, a 11.6% increase from the year before. The growth in the number of multiple mortgages doesn’t seem all that large. The amount additional mortgages is rising substantially, as is the size of these loans.
Note: Toronto didn’t see prices really spike until the last quarter of 2017, and the first half of 2017.
Vancouver Real Estate
Vancouver experienced huge growth. In 2016, 13,573 new mortgages to issues with homes with existing mortgages, a 25.4% increase from the year before. The average debt for these loans was $389,595 in 2016, a 15.8% increase from the year before. Here we got huge growth in both the number of mortgages on already mortgages homes, and the size of those loans. Actually, the increase of loans is so large, it makes Toronto’s growth seem like peanuts.
Montreal Real Estate
Homeowners in Montreal are taking less aggressive steps to use their home equity. In 2016, 17,532 new mortgages were issued to homes with existing mortgages, a 0.7% decline from the year before. The average balance on these homes stood at $167,092, a 3.0% increase from the year before. Here we get a decline in the number of loans, and the balance of the mortgage is almost half of what it is in Toronto.
People borrow against their home equity for various reasons, from emergency funds to sending their kids through school. The amount of money borrowed to qualify for this number is interesting, however. The mortgages would have had to increase by at least 10%, which makes it the perfect amount for another downpayment. These mortgages also showed the largest growth in BC cities, where prices went parabolic in 2016. It’ll be interesting to see if Toronto’s numbers soar in 2017, when prices decided to make their own parabolic move, in the first half of the year.
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