- 13% of aspiring homeowners plan on purchasing a home in
2024. 26% plan on doing so in 2025 or later.
- 62% believe owning a home is still one of life's biggest
aspirations, but 56% of aspiring homeowners feel owning a home is
unattainable.
TORONTO, April 29,
2024 The BMO Real Financial Progress
Index reveals the majority (72%) of aspiring homeowners are
waiting until interest rates drop before purchasing a home – a 4%
increase from 2023 – amid rising concerns about the cost of living
(58%), inflation (56%) and their overall financial situation (38%),
over the past three months.
According to BMO Economics, homebuyers may need to wait
longer for affordability relief. The Bank of Canada left interest rates unchanged in April,
but left the possibility open for a rate cut by June or
July 2024.
"Demographic forces have allowed some pent-up demand to build,
and market psychology is such that many are expecting rate cuts in
the second half of the year," said Robert
Kavcic, Senior Economist, BMO Capital Markets. "This should
pull some demand off the sideline and firm up housing activity, but
rates have a long way to fall still before affordability is
restored to recent norms."
The BMO Real Financial Progress Index found 85% of
Canadians believe they are making real financial progress and over
two thirds (67%) feel confident in their financial situation, but
fear of unknown expenses (84%) and concerns about their overall
financial situation (81%) and housing costs (74%) are among the
leading sources of financial anxiety.
Top economic and environmental concerns affecting Canadians'
homebuying decisions include:
- Redefining the Canadian Dream: While 62% believe
owning a home is one of their biggest aspirations in life, 56% of
aspiring homeowners feel homeownership is unattainable.
- Pent Up Demand: Among the 39% of aspiring
homeowners planning on purchasing a home in the near future, only
13% plan to in 2024 and more than a quarter (26%) plan on doing so
in 2025 or later.
- Reexamining Refinancing: Nearly three quarters
(74%) of homeowners who plan to refinance their home say they will
wait until mortgage rates drop before refinancing.
- Climbing Climate Considerations: 39% of Canadians
say climate-related factors such as wildfires, floods, heatwaves,
and storms will affect where they choose to live in the next five
years. Gen Z (54%) and Millennials (49%) are the most likely to
prioritize climate-related factors in their homebuying
decisions.
- The Cost of Homeownership: 41% say rising home
insurance costs may affect their ability to maintain or buy a
home.
"Homeownership is more than a milestone. Homeownership
represents the achievement of real financial progress, security and
wealth creation for many Canadians and their families," said
Gayle Ramsay, Head, Everyday
Banking Segment & Customer Growth, BMO. "As many
first-time homebuyers wait for their chance to enter the market, we
encourage Canadians to get started on their homebuying journey by
meeting with a professional advisor or planner to learn more about
the different paths to homeownership and build a personalized
financial plan that can incorporate tools such as the First Home
Savings Account or BMO Savings Goals to get them on track towards
their financial milestones."
Paths to Homeownership for the
Next Generation
As Gen Z and Millennials1 look forward to achieving
their next financial milestone, the survey found they are
approaching homebuying differently than other generations:
- Homeownership is Where the Heart is: Despite their
concerns about the economy and cost of living, Millennials (70%)
and Gen Z (68%) are the most likely to believe owning a home is a
big aspiration in life.
- Chasing the Canadian Dream: While over half of Gen
Z (51%) and Millennial (56%) aspiring homeowners plan on purchasing
a home in the future, 33 per cent of Gen Z and 37% of Millennials
believe this goal will not be achieved until 2025 or later – more
than any other generation.
- Bank of Mom & Dad:
- Gen Z (52%) and Millennials (31%) are the most likely to
expect to receive and/or plan to ask for financial help from their
parents and/or grandparents, with 16% of Gen Z and 12% of
Millennials looking for support towards a downpayment for a
home.
- Millennial parents (54%) are the most likely to provide
financial support to their adult children, where a third (33%)
intend to help their children with their home purchase including a
cash contribution towards a downpayment for a home (23%) and
contributing towards their child's First Home Savings Account
(FHSA) (10%).
"Despite the economic and market challenges, there are still
many young Canadians preparing to embark on their homebuying
journey and enter the real estate market for the first time," said
Hassan Pirnia, Head, Personal
Lending and Home Financing, BMO. "BMO's online tools and resources
can help Canadians wherever they are in their homebuying journey,
from giving buyers a better understanding of their budget at the
start to providing more clarity about what they can afford and the
carrying costs they should be considering."
BMO Helps Homebuyers Make Real
Financial Progress
BMO offers tools and resources to help customers throughout
their homebuying journey including:
- First Home Savings Account (FHSA): 58% of
Canadians plan on using the FHSA for their home purchase. The
tax-advantaged registered savings plan combines the benefits of a
Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings
Account (TFSA), where contributions are tax deductible, earnings
are tax-sheltered, and withdrawals are tax-free when used towards
qualified first-time home purchases. First-time home buyers can
contribute up to $8,000 a year, with
a lifetime contribution limit of $40,000.
- BMO SmartProgress: Customers can learn more
about homeownership, budgeting, and other personal finance topics
from BMO SmartProgress. The online education platform organizes
personal finance topics into playlists, enabling Canadians to learn
more about how to manage their finances in a widely accessible and
innovative platform.
- Pre-Approval: For homebuyers, getting
pre-approved provides a cushion for due diligence when purchasing a
home. In addition to visiting a local branch to speak with an
advisor, BMO offers the ability for homebuyers to apply for
mortgage pre-approval online. BMO also offers the longest rate
guarantee period of any major Canadian bank at 130 days.
- Pre-Qualification: To get started with their
homebuying journey, prospective homebuyers can get a mortgage
estimate in one minute with a 130-day rate hold. Using a soft
credit check that will not affect their credit scores, customers
will be able to know how much they can potentially afford for a
home, based on information such as income, assets, and debt.
For more information about first-time home buyers programs and
affordability tools,
visit: www.bmo.com/main/personal/mortgages/first-time-home-buyer/.
To learn more about how BMO can help customers make financial
progress, visit www.bmo.com/main/personal.
About the BMO Real Financial
Progress Index
Launched in February 2021, the BMO Real Financial Progress
Index is an indicator of how consumers feel about their personal
finances and whether they are making financial progress. The index
aims to spark dialogue that will help consumers reach their
financial goals and to humanize a topic that causes anxiety for
many – money.
The research detailed in this document was conducted by Ipsos
in Canada from February 28th to
March 18th, 2024. A sample
of n=2,500 adults ages 18+ in Canada were collected. Quotas and weighting
were used to ensure the sample's composition reflects that of the
Canadian population according to census parameters.
About BMO Financial
Group
BMO Financial Group is the eighth largest bank in North America by assets, with total assets of
$1.3 trillion as of January 31, 2024. Serving customers for 200 years
and counting, BMO is a diverse team of highly engaged employees
providing a broad range of personal and commercial banking, wealth
management, global markets and investment banking products and
services to 13 million customers across Canada, the United
States, and in select markets globally. Driven by a single
purpose, to Boldly Grow the Good in business and life, BMO
is committed to driving positive change in the world, and making
progress for a thriving economy, sustainable future, and inclusive
society.
__________________________
1The BMO Real Financial Progress Index defines
Millennials as Canadians born between 1981 to 1996 and Gen Z as
those born between 1997 to 2012. Only Canadians over the age of 18
were eligible to participate in the survey.
SOURCE BMO Financial Group