High interest rates continue to affect home buyers. As many as 13% of Canadians who recently purchased a home managed to do so only after being forced to postpone an earlier planned purchase. This is three times more than last year. And again this year, nearly a third of buyers had help from their parents or another generous relative.
These are two of the indicators revealed to us by the Canada Mortgage and Housing Corporation (CMHC) in its most recent annual survey of mortgage borrowers.
The survey conducted this spring by Léger for CMHC reached 3,866 buyers who had obtained a mortgage loan during the previous 18 months.
First-time home buyers – “first-time buyers,” in mortgage lingo – and immigrants were among the buyers most likely to have had to postpone their purchase due to rising interest rates: 18% of first-time buyers and 26% of newcomers who took out their loan during the period covered by the survey would have done so sooner if rates had not increased.
This reality is on the rise across the entire sample surveyed this spring: during the 2023 survey, only 5% of buyers said they had to postpone their purchase because of the rise in rates (instead of 13% in this year).
Payment default concerns and risks
Moreover, the CMHC survey reveals an increasing general concern: 65% of borrowers said they were affected by the increase in rates in this year’s survey; it was 50% last year.
Half of respondents said they were worried about the risk of default and 14% indicated that they had actually had difficulty paying their monthly mortgage payments.
Many respondents said they had taken steps to reduce the risk of defaulting, such as reducing expenses (43%), monitoring the budget (42%), increasing income (20%), selling household goods. value (11%), consolidate debt (10%) and seek financial advice (10%).
Dad, mom and roommates
Other strategies were used. This year, for the first time, the annual survey of borrowers examined the living conditions and co-ownership agreements of respondents: 12% of respondents indicated that they shared the purchase of their home with a roommate or an adult in their family who was not their spouse.
Parental help remains an important factor in purchasing a first home, since 30% of respondents indicated having received a monetary gift which helped them raise the amount necessary for the down payment. And among them, 32% said they would not have been able to buy their house without this donation (this was 37% in 2023).
Help from parents – often a substantial amount – is a fairly recent phenomenon, says financial planner Sylvain De Champlain, of De Champlain Financial Group, in Montreal.
“The boomer generation, in general, is the first to be comfortable, to have accumulated money. Their parents, generally, did not have a lot of money and, in any case, the mentality was: ‘They will inherit when I die'”, observes Mr. De Champlain, who started in the profession he 38 years ago. “Today, the subject of money is no longer a taboo, and these boomers are realizing that their children need this money now, not in 20 years. »
On the other hand, Mr. De Champlain notes that members of the generation old enough to buy their first home live in a more volatile professional environment. “Their situation is less secure,” he said. Not to mention the fact that the average price of a house now represents a greater multiple of the average annual salary than it did 30 or 40 years ago. “Prices have exploded much faster than wages. »
Mr. De Champlain says he has among his clientele young people who – like the many respondents in the CMHC survey – have put off buying a house because of interest rates: “There is a certain disillusionment . But I tell them to keep saving and wait. When mortgage renewals arrive in large numbers in two or three years, at higher rates, I believe the average house price will fall. This wouldn’t be good news for people who bought at quite high prices during COVID-19 at very favorable rates, but I believe that’s how it is. »
The CMHC survey reveals that almost half of all buyers in 2024 paid the maximum price they could afford for their home (46%, the same as last year). Nearly a third (35%) paid more than expected.
But the survey concludes with an optimistic sentiment: “Although buyers continue to be concerned and uncertain during the home buying process, the majority (79%) still believe it is a good long term investment. »
reference: www.lapresse.ca