Photo: James Bombales
Prospective homebuyers say they won’t be jumping into the Canadian housing market anytime soon if interest rates continue to rise.
According to the Canada Mortgage and Housing Corporation’s (CMHC) 2018 Prospective Home Buyers Survey, the majority of prospective homebuyers said they are concerned that interest rates could increase between now and the time that they make their home purchase.
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The online survey, conducted in October 2017, investigates the home buying intentions for three groups of future homebuyers, including first-time buyers, previous homeowners and current homeowners.
According to the survey results, 61 per cent of first-time buyers said interest hikes would hold-up their plans to purchase a home, along with 54 per cent of previous homeowners and 50 per cent of current homeowners.
A similar sentiment was shared among Canadians polled in MNP’s Consumer Debt Index released last month. According to the personal insolvency firm’s survey, four in ten Canadians are afraid they’ll be in financial trouble if interest rates increase.
“The results highlight just how financially vulnerable Canadians are. Even small interest rate increases result in escalating financial strain and anxiety,” said Grant Bazian, President at MNP LTD, in a press release that accompanied the January report.
In CMHC’s survey, the majority of all future homebuyers also said they’re concerned about the possibility of interest rates rising during the duration of their full amortization period.
Rate hikes aren’t the only thing that will postpone purchasing plans for prospective homebuyers.
In fact, future homebuyers said they are more worried that a spike in home prices will cause a delay in their purchasing plans. Roughly three-quarters of first-time buyers said an increase in home prices will defer their goal to buy a home, along with 73 per cent of previous owners and 63 per cent of current owners.
New mortgage rules are another hurdle that may prevent homebuyers from diving into the market anytime soon.
In the survey, CMHC asked respondents if they were aware of the mortgage qualification changes that were implemented in 2016, including a 10 per cent down payment on a portion of any mortgage CMHC insures over $500,000 and a mandatory stress test for all insured mortgages.
Only 36 per cent of first-time buyers were aware of those rule changes, along with 53 per cent of previous owners and 58 per cent of current owners. Out of these future homebuyers, half of first-time buyers and previous owners and 65 per cent of current owners said the stricter regulations would delay their plans to purchase a home.