30 per cent of Canadians are expecting to pay between $400,000 and $799,000 for their first home

According to a new report released today by BMO, while sentiment on housing affordability is climbing higher among first-time homebuyers, the outlook varies from province to province. And, with household debt and higher interest rates, first-time homebuyers across the country indicate that they are looking for help from friends and family when purchasing a home.

Looking across the country, first-time buyers in Atlantic Canada expect to pay the lowest average price at $326,700, whereas buyers in Ontario and British Columbia are planning to pay at least $100,000 more ($443,705 and $445,294, respectively).

The report, conducted by Pollara Strategic Insights, also found:

  • Over one quarter of Canadians are looking for a financial gift between $5,000 and $50,000. On average, Millennials are looking for more help than their Generation X cohorts ($61,431 and $43,400, respectively).
  • Over 10 per cent of first-time buyers are looking for a financial gift of $100,000 or more.
  • More Millennials are living rent free at home while trying to save for a down payment. Overall, a third (36 per cent) of Canadians plan to share the financial responsibility with someone else to help with affordability.

“Up against external headwinds, parents and family members are being asked to help first-time buyers enter the real estate market. While a financial gift can help, a home financing solution that fits a homebuyer’s budget is equally important,” said Hassan Pirnia, Head, Personal Lending and Home Financing Products, BMO Bank of Montreal. “It comes down to ensuring that the homebuyer can sustain the costs of homeownership on their own. What can help is coming in to speak with a mortgage specialist – they will assist new homebuyers navigate through the various home financing options and, together, come up with a plan that fits their financial situation.”

Housing affordability
According to the report, close to half of first-time homebuyers believe the housing market is affordable but this view varies from province to province:

  • For Canadians looking to purchase in the next 12 months, 42 per cent consider the housing market to be affordable.
  • First-time buyers in Atlantic Canada are the most likely to see the market as affordable (62 per cent) and are followed closely behind by those in Alberta (58 per cent). Ontario and British Columbia aren’t sharing the same outlook. Only 32 per cent of first-time buyers in Ontario and 34 per cent of buyers in British Columbia believed their markets to be affordable.

“While not every Canadian sees the market as affordable, it’s clear that home ownership is still the goal,” noted Mr. Pirnia. “We generally expect that Canadians will get a bit of reprieve from rising rates, so the market for first-time buyers is more favourable.”

According to BMO Economics, six out of 11 of Canada’s larger cities are currently buyer’s markets for residential real estate: Calgary, Edmonton, Saskatoon, Regina, Vancouver, and Victoria. The optimism shown by Canadians planning to purchase their first home or condominium in the next 12 months reflects the overall affordability in most of the major regions of the country.

Interest rate guarantee
As Canadians chase the home ownership dream, having the time to do their due diligence during the home buying process is important. Of those surveyed, 74 per cent indicated that having the longest guaranteed mortgage rate period would make the process easier. On when first-time buyers indicate they will get pre-approved, the majority (56 per cent) say they will before they start searching for a home.

“Making that first purchase – whether it’s a house or a condominium – is a big decision,” said Mr. Pirnia. “It’s important to support and help first-time buyers in the process. Providing the longest guaranteed rate is one way BMO is doing that. We’ll continue to look for ways to help Canadians on their housing journey.”

The report also revealed mortgage preferences for first-time buyers and found that most (55 per cent) would select a fixed-rate mortgage, while fewer than a quarter (24 per cent) indicated they would choose a variable rate mortgage. The current interest rate environment is having an impact on the decision. Nearly 40 per cent of those surveyed indicated that they were more likely to get a fixed rate mortgage, as a result of rising rates.

Mr. Pirnia added that, when looking at the type of mortgage, it’s important to consider how the choice will affect day-to-day finances. A customer who likes the certainty of knowing exactly how much of their monthly payment is going to principal versus interest may not be the best fit for a variable mortgage even at a lower starting rate.

To learn more or to connect with a BMO Mortgage Specialist, visit: https://www.bmo.com/main/personal/mortgages/

The First-Time Home Buyers Survey was conducted by Pollara Strategic Insights via an online survey between March 6th and 19th, 2019, with an online sample of 801 Canadians looking to buy their first home in the next 12 months. Data has been weighted using the latest Canadian census information to be representative in terms of gender and region. The margin of error for a probability sample size of 801 is ± 3.5%, 19 times out of 20.