News Releases

TORONTO, ONTARIO--(Marketwired - April 23, 2013) - According to the BMO Home Buying Report released today, the real estate market in Canada will see very little in the way of competitive bids in 2013, with the majority of Canadians (72 per cent) unwilling to enter a bidding war when making an offer on a home. However, first-time buyers appear the most willing to battle for a listing, with 39 per cent willing to enter a bidding war to secure a property compared to 28 per cent of total buyers.

Regionally, the survey, conducted by Pollara, revealed:

The report also revealed:

• Only 15 per cent of owners would be willing to under-price their home to spark a bidding war
• In the major city centres, those in Toronto are the most likely to under-price their home to spur competition (25 per cent), followed by Vancouver and Calgary (17 per cent and 12 per cent respectively)
• The majority of likely buyers (58 per cent) intend to set a budget and stick to it; however, an additional one-in-three (35 per cent) say they plan to set a budget, but would be willing to go over it for a home they really want
• The attitudes of first-time buyers are similar, with 59 per cent intending to set and stick to a fixed budget, while 37 per cent say they might be willing to go over budget

As many Canadians set out to buy a house or condo this spring, Laura Parsons, Mortgage Expert, BMO Bank of Montreal, noted that those on the hunt for their dream home need to set and stick to their house-hunting budgets.

"It's essential Canadians keep their emotions in check when shopping for a home and avoid over-extending themselves as a result of a bidding war or by purchasing a home they cannot realistically afford," said Ms. Parsons. "One of the most effective ways to do this is to work with an expert well in advance to build a budget and determine what is financially appropriate."

Ms. Parsons added that total housing costs should not consume more than one-third of household income. Further, Canadians should consider choosing a shorter amortization to save thousands in interest costs and begin building equity sooner.

According to BMO Economics, average home prices across Canada continue to rise modestly. Across the country, prices have seen unusually calm single-digit increases over the past year. The average home sale price in Canada is currently $378,532.

"Regina, Winnipeg and the Hamilton area have led the way in home price increases over the past year, while Victoria saw a 7.5 per cent decline," said Robert Kavcic, Senior Economist, BMO Capital Markets. "But by and large, prices are holding up. The market remains relatively balanced overall, leaning slightly in favour of buyers in some select markets."

BMO offers the following advice for Canadians searching for a house or condo this spring:

Stress-test your budget: Stress test your financial budget using a mortgage payment based on a higher interest rate. If rates rise even 1 per cent, you will need an additional $126 per month on a $200,000 mortgage.

Live within your means: Stick to the "one-third" rule to ensure you're living within your means. Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of overall household income.

Think carefully about fixed vs. variable: While variable rates mortgages have been a winning strategy over the long term, fixed rate mortgages (currently near historic lows) come with the peace of mind of being insulated against rate increases.

Consider choosing a shorter amortization: The shorter the life of the mortgage, the less you pay in interest. Choosing a maximum 25-year amortization helps households build equity in their home faster and save thousands in interest costs over the life of the mortgage. For example, on a $400,000 mortgage at a 5 per cent interest rate, choosing a 25-year amortization can save upwards of $70,000 in interest.

The report was conducted by Pollara. Survey results cited in this report are from online interviews with a random sample of 2,000 Canadians 18 years of age and over, conducted between February 25 and March 5, 2013. As a guideline, a probability sample of this size would yield results accurate to ± 2.2 per cent, 19 times out of 20. Data has been weighted by region, gender, and age, based on the most recent Census figures, so that it is representative of all adult Canadians.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at January 31, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.