TORONTO, Oct. 22, 2020
/CNW/ - With pent-up demand and low borrowing costs driving demand
in the Canadian housing market, first-time homebuyers are looking
to get their foot in the (homeownership) door. However, according
to BMO's latest release on the housing market, many indicate they
will look for help from family to get there. And with COVID as a
backdrop, first-time buyers say the pandemic will influence the
type of mortgage they choose.
The survey, conducted by Pollara Strategic Insights, found that
over half (56 per cent) of first-time homebuyers will rely on
family for financial assistance but the amount varies by region and
demographic:
- Provincially, buyers in British
Columbia and Ontario are
the most likely to look for financial assistance – 59 and 58 per
cent, respectively. Millennials are also more likely to look for
financial assistance than their Gen X counterparts.
- Among Canadian buyers looking for financial assistance, nearly
a quarter are looking for between $10,000 and $50,000. On average, these first-time buyers are
looking for more than $44,500 in
assistance.
- To help them get into their first homes, some buyers are
counting on a generous financial prop up. Of those looking to lean
on family for financial help, 11 per cent are expecting north
of $100,000. Millennials are
expecting the most help: nearly a quarter of Millennial buyers (23
per cent) are expecting $100,000 or
more.
"We continue to watch the impact that COVID has had on
homebuyers but would encourage buyers to be patient and ensure they
can sustain the monthly costs," said Hassan
Pirnia, Head, Personal Lending and Home Financing Products,
BMO Bank of Montreal. "In our
conversations, we typically advise prospective buyers not to spend
more than 30 per cent of their monthly income on housing. On our
side, we always look for opportunities to help with affordability –
like providing cash back offers for first-time buyers – or helping
to educate buyers about what they can afford. We offer tools and
resources such as our online calculators to help homebuyers get an
idea of their housing budget and see how much they can save with
shorter amortizations and accelerated payments."
Fixed vs. variable rate mortgages
With
households facing more cost uncertainty as a result of the
pandemic, many first-time buyers are looking for certainty with
their mortgage:
- A majority of homebuyers (57 per cent) indicate that, when the
time comes to secure a mortgage, they will opt for a fixed rate
mortgage.
- Of those on the fence about the type of mortgage, over 30 per
cent indicate that COVID has made them more likely to gravitate
towards a fixed rate mortgage. In contrast, only eight per cent are
more likely to go with a variable rate mortgage as a result of the
pandemic.
- For first-time buyers looking at variable rate mortgages, many
(55 per cent) are looking long-term and believe that they will end
up paying less over the term of the mortgage. Regionally, buyers in
Atlantic Canada, Alberta, and Ontario are the most likely to share this
sentiment (67, 63, and 60 per cent, respectively).
"For first-time buyers that are in a comfortable financial
position, we are in a favourable interest rate environment," added
Mr. Pirnia. "When looking at the type of mortgage, it's important
to understand how the choice will affect day-to-day finances and
long-term financial plans. We have a team of mortgage
specialists across the country that can help with navigating this
decision to ensure that it fits the needs of each individual
homebuyer."
To help provide first-time homebuyers peace of mind, BMO has
introduced a new digital solution that allows them to apply for
mortgage pre-approval online and receive a decision in real time.
As well, the bank offers the longest rate guarantee period at 130
days. For more information on mortgage options and affordability
tools or to be pre-approved online, visit:
https://www.bmo.com/main/personal/mortgages/.
The BMO First-Time Home buyers Survey was conducted by
Pollara Strategic Insights via an online survey between August
25 and August 31, 2020, with an online sample of 801 adult
Canadians. The margin of error for a probability sample size of 801
± 3.5% is 19 times out of 20.
About BMO Financial Group
Serving customers for
200 years and counting, BMO is a highly diversified financial
services provider - the 8th largest bank, by assets, in North
America. With total assets of $974 billion as
of July 31, 2020, and a team of diverse and highly engaged
employees, BMO provides a broad range of personal and commercial
banking, wealth management and investment banking products and
services to more than 12 million customers and conducts business
through three operating groups: Personal and Commercial Banking,
BMO Wealth Management and BMO Capital Markets.
SOURCE BMO Financial Group