May 25, 2018
Mortgage Matters: Confidence boost
Canadians reveal highest home purchase intent in eight years
By Kevin Lutz
Resurging confidence in the Canadian economy and employment is boosting home-buying intentions to the highest levels since 2010, despite the federal government’s new mortgage “stress test.”
According to the Annual RBC Home Ownership Poll, 32 per cent of Canadians are very or somewhat likely to buy a home in the next two years, up seven percentage points from last year. In B.C., the numbers are higher, with 36 per cent intending to purchase. That’s an 11 per cent increase from 2017.
The new guidelines are, however, affecting purchase decisions in other ways. For instance, consumers are making higher down payments, delaying home purchases or buying a less expensive, smaller home or moving to a less expensive location.
As intentions to buy continue to climb in Canada, just over one one-third of Canadians indicated they had received or would be receiving financial assistance from their family for a down payment, while almost an equal number plan to do it on their own with a dedicated savings account.
Finding the right property
The top two home-buying challenges buyers face are choosing the right property and deciding how much they can afford to spend.
For most, this journey begins online, and home owners revealed they spent an average of five weeks searching online for their current home. In fact, nearly one in 10 millennials said they would purchase a home without ever physically seeing it.
Overall, Canadians value being able to “visit” a home virtually, with almost half saying they looked at photos/videos of prospective homes online. Finally, to help determine costs and affordability, 39 per cent of home owners took valuations of neighboring homes into account, and 36 per cent used affordability calculators.
Strong economy inspires
greater millennial confidence
Millennials (ages 18 to 34) expressed the strongest of home-buying intentions (50 per cent), according to the annual RBC Home Ownership Poll. Compared to 2017, more millennials now believe that a home purchase is a good investment. In fact, 84 per cent responded it’s a “very good or good investment” vs. 79 per cent in 2017. Millennials are also feeling less anxiety about employment (36 per cent vs. 47 per cent in 2017).
Interest rates driving
Sixty one percent of Canadians are very or somewhat concerned about interest rate increases—a jump of almost 10 per cent from last year. Over one-third are thinking about buying a home sooner because of current low interest rates, while another one-third are also thinking of doing so because of a potential increase in interest rates.
Future proof your financial life
Do your own stress test. While optimism about the job market and the economy has increased, it can also lead us to feel overly optimistic about what we can afford. Your home is more than just a place to live. It is a big investment that can affect your plans to retire, your ability to afford an education for your child or make things tight on a monthly basis.
Whether you’re buying your first home or helping your children buy their first home, it’s important to meet with an expert to get a better idea of what impact that will have on your long-term savings plan.
Kevin Lutz is RBC Regional Sales Manager,