Affordability crisis leads to homebuying delays in Canada – CMHC

'Canadians are cash-strapped and are making do with much, much less'

Affordability crisis leads to homebuying delays in Canada – CMHC

Rising interest rates have severely impacted Canadian homebuyers' timelines as more buyers are putting their purchasing plans on hold, according to the latest Mortgage Consumer Survey released by Canada Mortgage and Housing Corporation (CMHC).

The effect of interest rates was widespread, with 65% of mortgage consumers impacted in 2024. That’s up from 50% in the 2023 survey.

While 22% of homebuyers rushed their purchases due to rising rates, 13% were forced to postpone their buying plans – nearly three times more than in 2023.

First-time buyers and newcomers were among those most impacted, with 18% of the former and 26% of the latter saying they had to push back their purchase timelines.

On average, it takes 4.2 years for buyers to save their down payment, and 30% received financial gifts to aid their purchase.

“Canadians are cash-strapped and are making do with much, much less,” commented John Lusink, president of Right at Home Realty. “Figures from the Bank of Canada show that disposable income after paying monthly debt payments is alarmingly low and on the decline. Year-over-year, Toronto is showing a 55% decline in retained disposable income.

“For prospective buyers, this means they have less to save for their future home, and more and more buyers are relying on a gift from the Bank of Mom and Dad to make a purchase possible.”

The survey found that 30% of homebuyers received gifted funds to help cover their down payments, and 32% of gift recipients said they could not have purchased a suitable home without that financial assistance.

Conducted in January 2024, the Mortgage Consumer Survey collected responses from nearly 4,000 Canadians who recently renewed, refinanced or purchased homes over the prior 18 months, a period that saw interest rates hit multi-year highs.

While affordability strains were clear in the data, the report also showed consumer efforts to find alternate financing paths, according to Sam Carnovale, director of client relationship management at CMHC.

"We are seeing that consumers and the mortgage professionals who serve them are working hard to facilitate viable solutions to housing financing challenges, such as co-ownership arrangements and refinancing for renovations," Carnovale said. “We are also seeing a strong uptake in the financing of home improvements for energy efficiency, which will bring immediate and long-term benefits to homeowners and their communities."

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About 12% of respondents reported co-purchasing homes with roommates or adult family members. Additionally, 33% of those refinancing cited funding renovations as the primary reason, outpacing debt consolidation at 23%.

Despite the headwinds, 79% of mortgage consumers still view homeownership as a good long-term investment, and 65% expect home values to rise over the next year.

“If the Bank of Canada slashes rates this June as expected, it could give the market a much-needed boost,” Lusink said.

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