By Julian Merry
A recent survey for BMO of current and potential Canadian homeowners found that many potential and current homeowners are concerned about real estate prices and are changing where they get their mortgages from.
The survey was conducted in February and polled 1,000 Canadians ages 25 to 45 that were planning to purchase their first home within the next year and those who were already homeowners.
Seventy-one per cent of those surveyed think that homes are too expensive currently, especially in major urban centers. The average home price in February was $335,655, which shows a rise of almost 20 per cent over the past year.
Canadians also said that they think there is much more pressure to buy homes now with the pending changes to mortgage regulations and increasing mortgage rates. Several Canadian banks raised their fixed-rate mortgage rates in early April, the highest of which was up from 5.25 per cent to 5.85 per cent for a five-year term.
The changes in mortgage rules and rising mortgage rates are also driving more Canadian homebuyers to mortgage brokers instead of banks to finance the purchase of their homes. According to the Canada Mortgage and Housing Corporation, 42 per cent of buyers between the ages of 25 and 34 have used a mortgage broker in the past year.
Another survey at the end of March conducted by Ipsos-Reid for the Royal Bank of Canada showed that more Canadians were feeling the pressure and wanted to buy their homes before the mortgage rates rise, the new mortgage rules are implemented and before the HST tax is formally introduced in the summer.
Seventy-five per cent of these homeowners said they believed that preparation was the key to handling these changes, with 16 per cent doubling payments to reduce their principal and 18 per cent making lump sum payments. Sixty per cent have also paid off more principal by taking advantage of the lower rates. Over 30 per cent of those surveyed stated that the pending changes influenced their buying decisions and created a sense of urgency towards purchasing homes.
Julian Merry is a Broker with Royal LePage/Johnston & Daniel Division. Julian is a regular contributor to the Muddy York Toronto Real Estate Blog. Julian’s website is located at www.julianmerry.com.
