Many Canadians believe they will never get on the property ladder
High interest rates are a challenge too far for many would-be Canadian homebuyers, who say they will wait for the Bank of Canada to start cutting rates before they buy.
Mortgage payments alone may be reason enough to stay on the sidelines, but the newly updated BMO Real Financial Progress Index reveals rising concerns about the cost of living (58%), inflation (56%), and their own personal financial situation (38%) means that 72% of aspiring homeowners are not prepared to take the plunge just yet.
With rates still at 5% following the BoC’s latest decision, hope rather than certainty that there may be a summer cut, and the possibility that it may be among only one or two this year, committing to a home purchase will have to wait.
“Demographic forces have allowed some pent-up demand to build, and market psychology is such that many are expecting rate cuts in the second half of the year,” said Robert Kavcic, Senior Economist, BMO Capital Markets. “This should pull some demand off the sideline and firm up housing activity, but rates have a long way to fall still before affordability is restored to recent norms.”
The index also shows that overall, 85% of respondents feel they are making progress with their finances and two thirds feel confident. But financial anxiety remains, driven by fear of unknown expenses (84%), concerns about their overall financial situation (81%), and housing costs (74%).
Bank of mom and dad
Homeownership remains a key aspiration (62%) but 56% of poll participants believe they will never achieve it. The cost of ownership is not just about mortgage rates of course, and four in ten would-be buyers say they are concerned about home insurance costs while a similar share overall – and more than half of younger Canadians – say they will prioritize climate-related factors in their homebuying decisions, fearing the impact of wildfires, floods, heatwaves, and storms.
Buying a home without help is becoming harder for young Canadians and many will seek help from parents or other generous relatives or friends. While millennials may be among those receiving help from older relatives, they are increasingly the generation who will be providing the support as their own adult children look to buy their first home.
Despite the challenges, a recent survey from RBC also showed that desire to be a homeowner remains strong with 60% of Canadians under the age of 65 saying that owning a house or condo is a good investment, an increase from 53% in 2023.
