nesto: Early renewals increasingly popular in the new normal

nesto: Early renewals increasingly popular in the new normal

nesto: Early renewals increasingly popular in the new normal

Early mortgage renewals have steadily become more common this year, according to a new user traffic analysis by online brokerage nesto Inc.

This was especially apparent in August, which saw a significant uptick in the volume of renewal requests made more than four months before maturity.

“Short-term renewals (less than 2 months) represent less than 20% of our digital users’ intentions in 2020,” nesto said. “Before the pandemic, most users were sticking with their current lenders for close term renewals, while, during and after lockdown, most probably related to the market’s numerous fluctuations, they were more willing to shop around before the end of their term.”

The central bank’s inflation targeting strategy is playing a crucial role in this trend.

“With rates at their current lows, homeowners are shopping around and willing to pay lender penalties to break their mortgages and change to lower rates for a new term,” nesto said.

Meanwhile, long-term planned purchases had a marked decline in August, a development largely driven by the sustained impact of the COVID-19 pandemic.

“Comparing results from 2019 to 2020, in March 2020 and onwards, the majority of purchase applications had a timeline of less than 180 days,” nesto said. “We are seeing a very low number of long-term purchases, signalling that our users are opting for resale homes as opposed to new construction. This is to be expected considering the economic uncertainty that Canadians feel today compared to years prior. Another conclusion we draw from this is that many Canadians are choosing a home based on where they can live immediately, in the event a second period of lockdown arrives.”