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