Mortgage, Money and Dream – Our thoughts on Canadian Mortgage Market
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A latest BMO poll shows that the home buying intentions among the First Time home buyers are in decline in short term future. First time buyers are a very important part of the Eco-system. The initial target range for them may not be as big but they replenish the exiting mortgagors.

Lack of experience is one of the weak points of first timers. But they quickly learn the rules of the game. As an example a recent BMO survey data showed that they think interest rate will remain the same over next five years. At the same time they are also running stress test on their mortgages with higher rates.

The new mortgage rules have helped contribute to a soft landing in the real estate market. – Doug Porter, Chief Economist, BMO Capital Markets.

The RBC poll found that three-quarters (75 per cent) of Canadians feel that recent government changes to mortgage rules will impact or delay prospective home buyers from getting into the market – RBC

Mortgage rules effect on First Time Buyers Intentions

The BMO survey said that about two in three Canadians think that the new rule will not alter their home buying schedule. Only a small portion think that they have to wait longer to qualify for their purchase.

Government wanted to reduce the pace of debt build-up on common tax payers. Since housing is the main source of debt due to the high mortgage amount – the first place to go to is the entrance to the market. Obviously the First Time Buyers are the first target.

A lender earns from interest. So the fast drying stream of easy revenue and chronically infected by debt virus – the cash cow named homeowners – are a matter of serious concern for a lender.

A homeowner is free except the mortgage but a bank has shareholders to answer to. A weaker quarter may warrant an explanation – a solid one. Since the mortgage interest is the biggest slice of the revenue pie – it is easy to start the investigation with the mortgage side of the business.

Earlier this year a RBC poll said that the new rule is indeed giving cold feet to some buyers. Another poll conducted by RBC in 2011 showed somewhat stronger sentiment towards a purchase intention.

Do not expect to buy a home in the next two years - RBC Poll

Another report from Scotiabank pointed out that the rule change last summer perhaps has cut the number of potential home buyers by about 10%. The report pointed out that the first tiem buyers or the move up buyers may come out off the sideline due to available housing choices and the recent raise in mortgage rate.

The report indicated towards the longterm stable outlook of short term rate may prevent fixed rate from accelerating too fast.