Press release from Marketwire
New Mortgage Rules Mark One-Year Anniversary: Changes Have Not Affected Timeline for Two-Thirds of First-Time Buyers-BMO
- Regional differences: Ontario buyers most likely to stay the course, those in B.C. will wait longer, while buyers in Prairies and Quebec to buy sooner - BMO Chief Economist says housing market has stabilized following new rules - BMO encourages first-time buyers to stress-test their mortgage to ensure they can afford housing costs regardless of a rise in interest rates
Monday, July 08, 2013
New Mortgage Rules Mark One-Year Anniversary: Changes Have Not Affected Timeline for Two-Thirds of First-Time Buyers-BMO06:00 EDT Monday, July 08, 2013
TORONTO, ONTARIO--(Marketwired - July 8, 2013) - With tomorrow's one-year anniversary marking the most recent changes to mortgage rules in Canada, a BMO Bank of Montreal report reveals how the new measures have affected first-time home buyers.
The rule changes for government-insured mortgages - which went into effect July 9, 2012 - include reducing the maximum amortization to 25 years from 30 years and lowering the amount of equity that can be borrowed against a home from 85 per cent to 80 per cent of the property's value.
According to the survey, the majority (66 per cent) of first-time buyers indicate that the recent changes have not affected their timeline for buying their first home. One-in-five (19 per cent) said the changes have prompted them to wait longer to buy, while 14 per cent will buy sooner.
The report also noted the average amount first-time home buyers plan to spend is approximately $300,000, with an average down payment amount of $48,000 (16 per cent).
Frances Hinojosa, Mortgage Expert, BMO Bank of Montreal noted that choosing a shorter amortization is the most responsible approach to home financing. "It's something we have been encouraging our customers to consider for years, as it means becoming debt-free sooner."
According to Doug Porter, Chief Economist, BMO Capital Markets, the new mortgage rules have helped contribute to a soft landing in the real estate market. "While Canadian home sales weakened markedly at the time of the mortgage changes a year ago, they have since stabilized and have even partially recovered in recent months," said Mr. Porter. "For instance, Vancouver saw its home sales rise 12 per cent year over year in June."
The survey, conducted by Pollara, also revealed the following regional differences among first-time home buyers across Canada:
- First-time buyers in Ontario are the most likely (76 per cent) to say that the mortgage rule changes will not affect their buying timeline
- British Columbians are the most likely (33 per cent) to wait longer to buy their first home because of the measures
- Those in the Prairies and Quebec are the most likely (19 per cent) to say they will buy sooner
|Mortgage rules' effect on buying timeline||NATIONAL||BC||PRAIRIES||ON||QC||ATL|
|Will buy as planned||66%||60%||58%||76%||62%||64%|
|Will wait longer to buy||19%||33%||25%||11%||18%||28%|
|Will buy sooner||14%||7%||19%||13%||19%||7%|
"First-time buyers should stress-test their mortgage to ensure they are well financially prepared for homeownership and a potential upswing in interest rates - not only to manage costs, but also to pay off their mortgage as soon as possible," added Ms. Hinojosa. "Determining what your mortgage payments and overall costs of home ownership will look like, and then living in that financial reality for a year before entering the market, can be an effective strategy."
Ms. Hinojosa noted that first-time home buyers can get a head start on planning by getting pre-approved for a mortgage before setting out to find the perfect home. To learn more, please visit www.bmo.com.
The BMO First Time Home Buyers 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 $555 billion as at April 30, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.
FOR FURTHER INFORMATION PLEASE CONTACT:
Jessica Park, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver