The vast majority (85 per cent) of first-time buyers are spending the maximum they can possibly afford on their first home purchase, reveals a Canada Housing and Mortgage Corporation (CMHC) survey released Oct. 18.
That compares with 68 per cent of repeat home buyers stretching their budgets to the max, according to the survey of 4,000 Canadians who took out a mortgage in the past year.
Of all homebuyer respondents (not including mortgage renewer respondents), 43 per cent said they spent more on their new home than they had planned.
Affordability was the number one concern of first-time buyers, with more than twice as many first-timer respondents citing this as their biggest factor in choosing a home, compared with other factors such as location and condition of the property.
However, 76 per cent of first-time buyers said they were confident that they would be able to service their mortgage payments.
And despite their concerns over home price and affordability, nearly two-thirds of first-time buyers said they were not concerned by rising interest rates or the mortgage qualification stress test. Some 40 per cent of first-time buyers were not aware of the new mortgage qualification rules.
Only one in five first-time buyers said that the mortgage stress test had impacted their home purchase. Of those that were affected, not all chose to spend less on their new home, with others using savings or family financial help to top up their down payments. This finding seems to challenge market reports that the stress test and its reduction of buyer purchasing power is in large part to blame for the current market downturn.
Indeed, overall confidence in the real estate sector remained high. Responding to the survey in April 2018, 74 per cent of first-time buyers and 89 per cent of repeat buyers believe that homeownership is a good long-term financial investment. Nearly two thirds, 62 per cent, of first-time buyers and 70 per cent of repeat buyers believe the value of their house will increase in the 12 months from April 2018.
Check out the full results here.
— Joannah Connolly, Vancouver Courier