Thank you, Mr. Chair, and thank you to the committee for inviting the Canadian Mortgage Brokers Association to speak about the current situation in the housing and mortgage finance industry in Canada.
As mortgage brokers, our members are uniquely positioned to offer insight into the industry. Our footprint in Canada as mortgage brokers is very extensive. As an example, mortgage brokers fund over $70 billion a year in mortgages. That's the level of activity.
It's all types of mortgages including residential mortgages, commercial mortgages, development and construction mortgages, refinancing, debt consolidation, apartment buildings, and rental properties. It's very extensive. In fact, over 55% of first-time homebuyers use a mortgage broker. Imagine a mortgage industry without mortgage brokers.
We also distribute funds for alternative sources of financing, such as mortgage investment corporations and private mortgages.
We have a level of knowledge we're very happy to share. We understand the unique challenges Canadians face when it comes to home ownership. Our members live and breathe these challenges with these homeowners and potential homeowners, and this happens throughout the country.
We like to say that mortgage brokers are at the tip of the spear when it comes to home ownership because we make the dream of home ownership a reality for many people. When it comes to the issue of home ownership cost, that tip of the spear is the culmination of many costs that result in an end price for a home.
There are many factors that determine pricing, and many people seem to be alarmed at what is perceived as the high cost of home ownership, which also goes into the high cost of rent, because somebody has to own those properties. Ultimately these costs have to be paid, and that's why we are at the tip.
For most Canadians this is paid for by taking out a mortgage. It's that simple. As costs increase, your mortgage amount will increase as well.
As I have said, many observers and Canadians are alarmed at the high costs they face, or perceived high mortgage amount that's required to own a home. It's very important that we understand those costs, and we've submitted a letter to the committee. There are many factors to those costs.
We know that there is always the land cost, but when you look at development, there are changes in the building code every year. This increases costs. We don't build the same type of home we built 20, 30, or 40 years ago. We're always building a better product. That costs money. That may result in a higher mortgage amount for somebody.
Municipal fees are also a factor. As mortgage brokers, we are involved in development financing. We see lots of different costs in different municipalities. These costs are development cost charges, school fees, land acquisition fees, and land dedication fees. All of this actually adds to cost.
Municipal by-laws also add to cost. There's a requirement, as I said, for land dedication.
We're looking for livable community concepts. Urban planning professionals build better communities. These all cost money, and they culminate in the end price of homes for Canadians.
There's also a slow and frustrating development process that our developer clients see. They have to pay for that. Holding property costs money. They take out mortgages. Their interest costs accumulate, and they have to pass that on to the end purchaser.
We understand how these costs are manifested, and we are at the end, financing Canadians.
What we like to say is that there are also finance costs involved. We've seen recent changes to CMHC's insurance premiums. In our letter, we've actually submitted some examples, and we can refer to that in the question period, but in some cases now, the insurance premium is as much as the down payment that a homeowner is asked to put down.
Five per cent is the minimum down payment required. As an example, on a $500,000 purchase, $25,000 is the down payment. In an extreme case, you would pay about $22,000 in insurance costs. That's a very onerous cost at the end of the line.
The Canadian Mortgage Brokers Association would like to offer our consultation services and let you know that we are experts. Before changes are made to mortgage policy, we'd love to be consulted and provide the insight that we as professionals would love to impart to you.
Thank you.