A quarter of first-time buyers getting help to pay their mortgage, survey finds

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How interest rates may affect the housing market
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A quarter of first-time buyers are relying on outside financial help for their mortgage payments, and many are compromising on the kinds of homes they buy in order to break into the housing market, according to a new report.

The report published Thursday from Royal LePage paints a picture of young Canadians struggling to afford their first home amid a massive run-up in home prices and higher interest rates without help from their family.

The survey, done in conjunction with private mortgage insurer Sagen, polled more than 2,200 Canadians aged 25-45 from Feb. 22 to March 27, before the Bank of Canada’s latest rate hike on June 7. Respondents had either purchased a home since 2021 or intend to in the next two years.

Among those who bought their first home in the past two years, 35 per cent said they got a lump-sum payment from their parents or other relatives to help finance the purchase. Some 41 per cent of buyers surveyed in Vancouver and 36 per cent of buyers in Toronto said they got such a contribution to help with their purchase, according to the survey.

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One in four respondents meanwhile said they’ve received financial help with their monthly mortgage payments; roughly a third (34 per cent) of Calgary’s first-time buyers said this was the case for them.

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Money Matters: How to decide whether to buy or wait in a complicated housing market

Almost half (46 per cent) said their financial boost was a gift, while 37 per cent said it was a loan that will be repaid.

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Royal LePage CEO Phil Soper said in a statement accompanying the report that demand for housing is outpacing supply, driving up home prices and raising the barriers for first-time buyers trying to break into the market alone.

Higher interest rates force compromises

Higher interest rates from the Bank of Canada, which have raised the cost of borrowing in an effort to cool demand in a housing market that ran hot during the pandemic, are also a barrier for first-time buyers.

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These high rates are pushing some buyers to change their home-buying plans, the survey suggests.

One in three (34 per cent) of first-time buyers said they bought a home in a more affordable neighbourhood or region than initially planned amid tighter economic conditions including higher interest rates and surging inflation. A similar percentage (32 per cent) said they bought a smaller home.

Among regions highlighted in the report, first-time buyers in Montreal were most likely to purchase in a more affordable neighbourhood amid unfavourable economic conditions (43 per cent), while Calgarians were more likely to downsize their home (41 per cent).

Roughly one in 10 Canadian buyers said higher interest rates and inflation pushed them to seek financial assistance from family or friends to make the purchase.

And the pain of higher interest rates doesn’t look to be easing anytime soon, with many economists predicting another rate hike from the Bank of Canada next month.

First-time buyers getting older

The time needed to save for a larger downpayment is also delaying that first home purchase for many buyers, according to Royal LePage.

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The 2023 iteration of the polling found 24 per cent of first-time buyers were under the age of 30, with 33 per cent aged 30-34 and 43 per cent older than that.

The 2021 version of the survey, however, had 29 per cent of those under 30 buying their first homes, 38 per cent buying from age 30-34 and 33 per cent buying after that age.

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Soper said that while the later entry into the housing market correlates with Canadians spending more years in school and hitting “life’s milestones later in adulthood,” he added that the role of unaffordable housing in Canada cannot be ignored.

“The fact that first-time buyers are entering the market older than they were just a few years ago is more directly linked to the increased cost of borrowing and the unprecedented home price appreciation we saw during the pandemic real estate boom,” he said in a statement.

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To learn more about how you can break into Canada’s housing market, check out Global News’ Home School series here.

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