caamp fall 2013 mortgage insights

7/27/2019 CAAMP Fall 2013 Mortgage Insights

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mortgageinsights 2013

January, 2014 |

mortgageinsights

2013

highlights from CAAMPs

fall 2013 Survey

2,000 Canadians have their say on

the economy, the housing market,

and choosing a mortgage.

Written by:

Kyle Davies

Maritz Research Canada for the

Canadian Association of Accredite

Mortgage Professionals


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mortgageinsightswas written based on findings taken

from research conducted by Maritz Research Canada for

the Canadian Association of Accredited Mortgage

Professionals.

Canadian Association of Accredited Mortgage

Professionals (CAAMP)

2235 Sheppard Avenue East, Suite 1401

Toronto, ON M2J 5B5

Maritz Research Canada

6900 Maritz Drive

Mississauga, ON L5W 1L8

contacts

Jim Murphy, AMP

President and CEO, CAAMP

416 644 5465

[email protected]

Kyle Davies

Account Director, Maritz Research Canada

905 696 6243

[email protected]

about the research

Results are taken from CAAMPs Fall 2013 Consumer

Survey. This research was conducted online among a

population of 2,000 Canadians, weighted to

representative proportions in terms of home ownership

and mortgage status within each region of Canada. This

survey was fielded in October, 2013.

author

this mortgageinsightsreport was written by

Kyle Davies

Account Director


introduction

As the organization representing

the brokers, lenders, insurers and

other industry stakeholders

operating within Canadas

mortgage broker channel, one of

CAAMPspriorities is to provide its

members with timely information

about the market, and aboutCanadian consumers and their

priorities when obtaining a

mortgage. It is with this priority in

mind that CAAMP has partnered

with Maritz Research Canada to

conduct semi-annual consumer

surveys for the past eight years.

This report details many of the key

findings taken from our most recent

round of research, conducted in

October, 2013. Along with CAAMPs

semi-annual State of the Residential

Mortgage Market in Canada

reports prepared by CAAMP Chief

Economist Will Dunning, this reportis provided by CAAMP to its

members as a tool to be used to

help better understand and serve

Canadian mortgage consumers, and

ultimately to maintain and grow a

healthy mortgage broker channel in

Canada.


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The Canadian economy, particularly the housing

market, has been the focus of intense scrutiny

and speculation for the past five years; Are we in

a bubble? Will home prices crash? Have low

interest rates drawn people into homeownership

who should not be homeowners? When, and

how much will home prices fall when the marketcorrects? These and many other questions are

the focus of what seems like daily discussion and

analysis.

In the face of this often intense, usually negative

narrative, our study findings show the Canadian

public has remained surprisingly positive,

optimistic, and resilient. Despite some

nervousness about the economy overall, the

majority of Canadians including homeowners

remain confident and comfortable in their

financial position, and the vast majority continue

to believe that Canadian real estate is a good

long-term bet.

the economy


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Rising debt levels of the average Canadian household

have brought credit and debt under intense scrutiny

over the past several years. While debt is often

spoken of, and thought of, in a negative light,

mortgage debt carries positive feelings for many

Canadians, as the tool enabling homeowners to live

the lifestyles they have chosen for themselves.

Eighty percent of Canadians feel mortgages are

good debt, likely in large part because 84% of

Canadians feel as though real estate is a good long-

term investment. While longer-term confidence

remains high, some remain nervous about the short-

term economic outlook for Canada, with three-in-tensaying they are notoptimistic about the economy in

the next 12 months.

While most groups of Canadians remain positive

about the economy and housing, this positive

outlook is slightly muted among the younger

generation, with 27% of 18-34 year olds not agreeing

that mortgages are good debt (compared with 20%

overall), and 24% of 18-34 year olds saying real

estate is not a good long-term investment(compared

with just 15% overall). While not overly negative,

these numbers do signal a heightened nervousness

among this group, which no doubt impacts the

decisions 18-34 year olds are making with regards to

spending, investing, and real estate.

Canadians feel positively about the

economy and housing market


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Expectations of next years growth have

decreased to 2008 levels.

5

One metric that has softened substantially since

2012 is the extent to which Canadians expect

housing prices to increase in the next year. After

2008, this metric jumped to levels much higher than

they were pre-recession, and they remained steady

for several years. 2013 is the first time we have

noticed a sizeable drop since the recession, back to

pre-2008 levels. This indicates that while long-term

confidence remains high, there is some increasing

uncertainty about where housing prices will go in the

next year.

Over the next five years, most Canadians expectstability or slow growth in home prices, however

very few (3%) expect the rapid growth that has been

prevalent in the housing market over the past

decade. One-in-five expect slow declines in values,

while one-in-ten expect the bubble to burst.

Optimism in housing prices is highest in Alberta

(where those who expect increases more than

double those who expect decreases) and BC, and

lowest in Atlantic Canada and Ontariothough in all

regions, more people expect increases rather than

decreases over the next five years.

For mortgage professionals, these differences in

regional confidence may signal a meaningful

difference in consumer confidence and attitudes

around homebuying, and their mortgage. Western

clients are very likely to be bullish; however, those inAtlantic Canada and Ontario may be substantially

less optimistic about their decision. As much as

possible, a confident and knowledgeable mortgage

professional may be able to provide helpful guidance

and confidence through what could be a stressful

time.

Most expect housing price stability or

growth in the next five years

NOTE: calculation is the percentage who expect increases,

divided by the percentage who expect decreases.


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As the biggest investment most people will make in their lives, strong emotions

often go hand-in-hand with real estate and mortgage origination. These

emotions, though often irrational, play a key role in the decisions people make

with regards to the companies, people, and even the products they deal with.

Various writers and economists have speculated about the emotional health of

the debt-burdened Canadian, speculating that giant mortgages have left asizable portion of house owners living lives of quiet desperation1, and

[homeowners] are trapped, literally and figuratively, by those four walls around

us1. The reality is, while there is a natural level of nervousness and

apprehension in the market, the vast majority of homeowners are comfortable

with their homeownership and with their mortgage, and would make the same

decisions over again.

the emotions of homeownership

1. Why owning a home is bad for you, www.macleans.ca, September 29, 2013.


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When we asked Canadian

homeowners to choose the

emotions that best represented

how they feel about owning their

primary residence, the reaction

was extremely positive. Nearly

three-quarters are comfortable,

one-half are content, while more

than four-in-ten are secure and/or

happy. Many people feel excited

when they first buy a home, and

we see that this emotion has

carried through for three-in-tenhomeowners. Contrast this with

one-in-ten or fewer who indicate

any of the negative emotions we

tested, including stuck (10%),

bored (7%), stressed (6%), or

worried(6%).

How do you feel about your primary residence?

How do you feel about your mortgage?

While it may not be surprising to see

people happy about their homes, it

wouldnt be unreasonable to expect adifferent picture when we ask people to

focus instead on their mortgages.

However, Canadians are very positive

even when thinking about what is, in

many cases, their biggest form of debt.

Eight-in-ten mortgage-holders used at

least one of comfortable, content,

confident, and/or secureto describe their

feelings about their mortgage, while less

than one-quarter used either nervous or

stressed. While 22% feeling nervous or

stressed is nothing to ignore, and

something mortgage professionals

should look for and service accordingly, it is not necessarily surprising or indicative of a problem; a recent

StatsCan study shows that roughly one-quarter of Canadians are stressed in their everyday lives1, meaning

that mortgages stress people slightly LESS than every day life.

1. http://www.statcan.gc.ca/pub/11-008-x/2011002/article/11562-eng.htm


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Mortgage brokers remain a key channel Canadians look to for mortgage

information, advice, and arranging mortgages. In fact, 28% of outstanding

mortgages were originated by mortgage brokers (self-reporting), the highest

share for mortgage brokers going back over five years of tracking. Broker share of

outstanding mortgages jumped from 25% in 2012 to 28% in 2013 (an increase of

12%) due largely to a 40% share of all new mortgages that were taken out in

calendar year 2013 prior to the time of our survey (only slightly lower than the42% share held by the banks). Other channels, such as Credit Unions and

financial divisions of insurance companies, spiked in share after the 2008

recession, but have settled back into market share numbers in the high teens.

broker channel success


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As a channel, mortgage brokers do

particularly well among younger

Canadians (aged 34 or less) and

first-time homebuyers, who turn

to brokers over 40% of the time.

The mortgage broker value

proposition of advice, counsel, and

service resonates well with this

audience, many of whom are less

familiar with mortgages and

appreciate being helped through

the process.

There are several key components of market share, but the two most important for brokers are

consultation rates; that is, how many people are consulting with brokers, and conversion rates; the

percentage of those consultations that decide to do business with a broker. To best understand where the

direct-to-lender channel (i.e. banks) hold an advantage over mortgage brokers, we decided to look at both

of these elements. As shown below, banks hold a distinct advantage over mortgage brokers on BOTH

consultations, and conversion.

As a channel, the mortgage brokers

need to continue to do a better job

informing Canadians of their

presence and value to continue to

increase consultations. But the

lowest hanging fruit for

improvement is very likely in

conversion. Why are brokers losing

one-third of their potential clients,while banks are losing just one-in-

five?

On the following pages, we explore

potential actions those in the

broker channel could take to

increase both consultation and

conversion rates.


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One of the big reasons for the recent success and growth of the Mortgage Broker channel in Canada is

very likely the increasing levels of awareness Canadians have of the services provided by a mortgage

broker. While there is much room for continued improvement, the proportion of Canadians who say theyhave a full or good understanding of broker services has increased by one-third, from 33% to 44% over

the past three years. This impacts market share in a very direct way; those with a good or full

understanding of broker services give substantially more of their business, as a proportion, to brokers

than those who have a lesser understanding of broker services.

To improve consultation rates, it is vital for the mortgage broker channel, and its members, to continue

to educate consumers on the who, what, where, why, and when of mortgage brokers.

The best place to start would be to look at

the reasons WHY consumers deal with

mortgage brokers. Rates are important;

they represent a key advantage the broker

channel has over banks, but the interesting

finding from our research is that it is FAR

from the only reason customers choose

brokers. In fact, the average brokercustomer gave us 3.7 distinct reasons why

they chose a broker.

Many customers see mortgage brokers as valuable consultants, helping them get multiple quotes, doing

the research for them, helping customers understand their options, and helping with the paperwork;

these reasons were all cited by one-third or more broker customers. These are the things that should

continue to be communicated to Canadians about mortgage brokers, in the battle to continue increasing

customer awareness beyond the current 44%.


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We also asked Canadians why they chose

NOT to deal with a mortgage broker. The

second and third most common answersare also ones that should be tackled head

on in communications and education

about the broker channel. First, there is

still a perception among more than one-

quarter of non-customers that they will

pay for a brokers services. While this is

true in unique circumstances, it is not

largely the case. Second, lack of familiarity

with monoline lenders is a challenge for the broker channel, and a reason why 21% of non-customers

are non-customers. Our previous research has shown that this may be a hurdle, but it is not a

roadblock. Direct and purposeful communications to customers about the length of time a monoline

has been in operations in Canada, their financial health, and personal experiences/anecdotes can go a

long way to establishing comfort with a previously unknown Lender.

One finding from our study that stuck out was in relation to the number of quotes consumers get from

their mortgage broker. Getting multiple quotes is the second-most common reason a customer deals

with a broker, yet 57% of broker customers tell us they received just one quote from their broker. Thisis a HUGE disconnect, and likely a key reason why broker conversion rates are so much lower than

banks. Customers have chosen brokers at least in part for choice; they want to feel as though they are

getting sound advice and recommendations, however they also want to feel as though they have

played a role in the decision. Whether the choice is between two lenders, or even just between two

different mortgages such as fixed or variable, mortgage brokers should give their customers at least

two options, along with a clear recommendation of the option they believe is best for their customer.


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Mortgage brokers provide great value and service. The advice, consultation,

hand-holding, research, and paperwork is of great value to many Canadians.

However, brokers are not for everybody. Some people like to deal with banks.

Some people like to do the research themselves. Some people just dont care

about anything but getting the deal done and out of the way.

For the first time, in this years study we conducted a market segmentationanalysis to understand the different types of mortgage customers, so we can

better understand the attitudes, behaviours, and priorities that make a broker

customer different from the rest. The results of our analysis shows five sizeable,

yet very distinct groups of customers, who think and act very differently when it

comes to their mortgages. They are profiled on the following pages.

mortgage customer segmentation


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The largest group is called Advice Seekers, and these customers like to have options, to get

good sound advice, and are very open to dealing with a company whose primary (or sole)

business is mortgages (as opposed to a bank with many products and services). They are

between 35 and 54, often have a family, they skew slightly female, are full-time employed, and

earn between $60k and $125k per year.

VERDICT: These customers are PERFECT for mortgage brokers. Mass communications should

be geared toward the lifestage, demographics, and attitudes of this group, as they have shownthey are very likely to consider the services of a mortgage broker.


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The second largest group is called Carefree, and these customers are less likely to have a

mortgage, and are less likely to care about it if they do have one. They are not interested in

shopping around, dontwant to be cross-sold, only want minimal contact from their mortgage

professional, are not open to additional advice and recommendations, and would prefer to

deal with a bank.

VERDICT: These customers are NOT an ideal target for mortgage brokers. They may however

not be a lost cause as they can be convinced to work with a broker in some cases, but thisaudience should not be a key marketing or communications target for the mortgage broker

channel.


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The third largest group is called Vigilant, and these customers are the polar opposite to

Carefree. Vigilant think about all aspects of their mortgage, they seek out great quantities of

advice, appreciate proactive communication, would like to be presented with options to

choose from, and want to deal with a mortgage company (rather than a bank). They tend to be

male, 18-34, and many will be renewing a mortgage since they are already homeowners. Their

$60k-$100k household income is modest, meaning they are especially open to advice about

how to save money on their mortgage.

VERDICT: These customers are IDEAL for mortgage brokers. They want everything brokers are

good atoptions, service, communications, and great rates. This group is likely to do business

with a broker, but will evaluate them very carefully against other options in the market.


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The fourth largest group is called DIYers. DIYers are older, tend to be male, and tend to already

be a homeowner. Because they are more advanced in their careers and unlikely to have family

in the home, they have time to spend on their mortgage, and tend to want to do the work

themselves. They like to do research themselves, and are not generally open to advice from

family, Realtors, or other professionals.

VERDICT: These customers will do business with brokers, but only after comparison with other

options. Their copious research may inform them a certain lender is the best option for them,which may make them an easier customer to work with since they know what they want,

however their research appears to lead them to banks more often than not, making them a

low priority for broker channel focus.


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The smallest group (though still representing 18% of the market) is called Setit and Forget it.

This group puts forth the necessary amount of thought and work to be comfortable with their

mortgage selection, however after the mortgage has been placed they dont think about it

again until it is up for renewal. They tend to think they do not need much help from a

mortgage professional, are less likely to shop around, and are less open to cross-selling.

Though research will be done to make them comfortable with their selection, it is unlikely to

be thorough.

VERDICT: Since they do not feel as though they need help from a mortgage professional, this

group is not a great target for mortgage brokers.


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Advice Seekers give 49% of their business to mortgage brokers, while Vigilant give a 33%

market share to brokers, both substantially higher than the broker share among the other

three, less-engaged audiences.

For mortgage brokers, understanding these segments is key to future success. Below, we can

see the top eight qualities these two audiences are looking for. The blue qualities are also

things EVERYBODY is looking for, while the orange are things that are important to these

broker target segments, but not the othersin other words, these are the things brokers need

to be BETTER than the banks at.

From this data, we see that

brokers should continue to

focus on:

Getting the right

frequency of post-sale

contact (but make it

RELEVANT)

Making customers feel

valued

Offering a wide selection

of products and options


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Based on findings from this study and past studies, we make three

recommendations to brokers to increase share, satisfaction, and loyalty:

advice for brokers

Broker customers are looking for

professionalism and help, but they are also

looking for a relationship. The relationship

with a mortgage broker should include ahealthy mix of desired personal and

business qualities and skills.

Broker customers want options. They dont

just want you to tell them you evaluated a

number of options, they want to see them,

understand them, and work with you to

decide which one is best for them. Those

who have made a choice are much more

satisfied and loyal. For brokers, this may

mean presenting two different lender

options, or it may be as simple as

presenting a fixed and variable rate option

from one lender, along with a strong

recommendation on which one you think is

best for them. Either way, a customer who

feels like they were part of the process is

much more likely to be a happy customer.


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advice for brokers (continued)

It is difficult to maintain a healthy frequency

of communications, and to have those

communications stay relevant. One way to

do this is to try to widen the scope of topics

your customers think of you for but not

TOO wide! A Happy St. PatricksDay email is

not relevant, and does not keep you top-of-

mind. Rather, you may want to make

yourself into a trusted source of home

advice by providing useful and relevant

communications to customers about how to

get the most out of their home. Itswinter:

did you remember to turn off your outdoor

faucet?. Do you need a new roof? Here

are five things to think about.

These types of communications may not be

read every time by everyone, but they stand

a good chance to keep you top-of-mind, so

that when the customer has a question

about their mortgage, there is no doubt

who they will call.


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About the Author

Kyle Davies is an Account Director for Maritz

Research Canada. He has over 10 years of

experience conducting marketing-research based

consulting for some of Canadas leading

organizations, focused primarily in the financial

services, telecommunications, and retail sectors.His work often focuses on helping clients to gain

a better understanding of customer sentiment,

and helping them to harness that knowledge to

create happier and more loyal customers. He can

be reached at:

[email protected]

905.696.6243


a division of Maritz Canada Inc.

Maritz Research Canada provides consultative

services based on primary marketing research to

many of Canadas top companies and

organizations. Our focus is on helping our clients

to understand and optimize customer experienceand loyalty. Maritz Research is a Gold Seal

Member of Canadas Marketing Research and

Intelligence Association (MRIA), and is the

worlds 12th-largest marketing research

company.

Canadian Association of Accredited Mortgage Professionals (CAAMP)

CAAMP is the national organization representing Canadas mortgage industry. With over 12,000

mortgage professionals, its membership is drawn from every province and from all industry sectors.

This diversified membership enables CAAMP to bring together key players with the aim of

enhancing professionalism.

In 2004, CAAMP established the Accredited Mortgage Professional (AMP) designation to enhance

educational and ethical standards for Canada's mortgage professionals. Established in 1994, CAAMPhas taken a leadership role in Canadasmortgage lending industry and has set the standard for best

practices in the industry.

CAAMPs other primary role is that of consumer advocate. On an ongoing basis CAAMP aims to

educate and inform the public about the mortgage industry. Through its extensive membership

database, CAAMP provides consumers with access to a cross-country network of the industrys

most respected and ethical professionals.

about the contributors


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caamp fall 2013 mortgage insights

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