The housing market generates a lot of economic activity in Canada. Not just home selling and buying and construction but also for those industries connected to housing such as legal services, moving companies, landscaping companies, home improvement companies, etc. Each year, approximately 620,000 households move into newly-purchased homes in Canada. Of those about 45% or 280,000 are first-time buyers, most between the ages of 25 and 34, and many in the 45 to 64-age group.
Single-detached homes are the most popular house type purchased and accounts for 57% of all sales. The average price is about $347,000. The average down payment for first timers equals 21% of the price of the home.
Earlier this year, the Canadian Mortgage and Housing Corporation (CMHC) conducted an online survey looking at the home buying experiences of first timers. Here are the highlights:
- Loans and gifts from parents and other family members account for 7% of down payments
- 3% of all down payment come from RRSP withdrawals
- 81% financed their purchase through a mortgage
- Fixed rates are the most common rates
- Most mortgages have five-year terms
There’s more! First time buyers are heavy online users and do their research. A whopping 83% of them went online to get more information about mortgage options and features – about half went to lender sites and a third went to mortgage broker sites. While online, 83% used mortgage calculators, 73% did their own financial assessment and about 4-in-ten got their pre-approval online.
Social media is another big draw – 56% used Facebook; one-third used a Forum; and 30% used a blog. Twenty-six per cent used a mobile device to get their info and one-in-five used a mortgage-related app.
And they shop! Seventy-one per cent contacted either a lender or a broker and 53% negotiated a better interest rate than the one they were originally offered.
Using a Mortgage Pro
Using a mortgage professional has become more popular among first timers, up from 42% in 2014 to 55%. A key driver is getting the best rate and the idea of a “great deal” was a strong influence as to who would get their business. About 4-in ten were referred to a specific broker and 79% of those ended up using that broker.
Seventy-eight per cent of first timers were satisfied with their experience working with a mortgage professional. And 43% said they would likely use a broker for their next mortgage. The one area that brokers seem to lag is in post transaction follow-up. Fewer than half of first-time buyers received any follow-up. What would they like? Many of them said useful information including long term mortgage/financial strategies and advice on how to manage financial difficulties.
Concerns and Uncertainties
It’s no surprise that first time buyers are less confident than repeat buyers. Even with all the research they’ve done, many still feel a little overwhelmed about the process and have a lesser understanding of their options than repeat buyers. Even more felt uncertain of what to do or where to get help if they were facing some financial difficulties.
Fifty-five per cent had concerns about the buying process and much of it had to do with the unexpected rise in the costs of owning a home. Thirty-eight per cent of then did incur unexpected expenses.
The mortgage industry is a competitive business. Mortgage professionals work with a wide variety of clients. They counsel and educate clients and help them understand the buying process. A broker also makes sure to understand what a first time home buyer needs and pays attention to both their financial goals and their personal goals – and not just in the short term.
It’s not surprising that more home buyers are turning to mortgage brokers to help them navigate the daunting process of buying a home. That number will continue to grow as the mortgage industry, with its variety of options and products, becomes more complex; and as the needs and the profiles of first time home buyers continue to evolve.