Is Home Ownership Becoming Out of Reach for Today’s Young People?
Matrix Mortgage Global – Is Home Ownership Becoming Out of Reach for Today’s Young People?
A new report[i] by Mortgage Professionals Canada is warning that a perfect storm is brewing on the Canadian mortgage front that is likely to produce a generation of permanent middle-class renters if we are not careful.
There are currently a number of factors that are contributing to this likelihood:
- The new mortgage stress test – since the stress test was introduced at the beginning of this year, home ownership has become less affordable for many Canadians. Now many must either choose between buying a less expensive home than the one they hoped for or waiting longer to save for a down payment. According to the report, the average prospective home buyer will be $29,000 short for their purchase.
- Increased reliance on parents – Because new federal rules are making it harder for young people to get into their first homes, more and more young people are turning to their parents for help with their down payment. This means that the ability to buy a home will depend less and less on their buyers’ income and more on their parent’s.
- Eroding affordability – Long before the federal stress test was introduced, home prices across Canada had been growing at a rapid rate. With home prices rising faster than incomes, it quickly put home ownership out of reach for many young people. In fact, since 2000, housing prices in Canada have tripled growing at a rate approximately twice as fast as the average income. To compensate for this, many Canadians took on massive consumer debt which now sits at near record levels.
The report goes on to make recommendations to the government on how to correct this problem. One such recommendation is to lower the level for the stress test from approximately 2% above the current rate down to 0.75% above the current rate.
Is home ownership still possible?
While many young people may have accepted the fact that they will always be home renters and never be homeowners, the truth is that there are still some solid strategies out there to help would be buyers get into a place of their own.
Mortgage brokers such as Matrix Mortgage Global offer many options ranging from alternative lenders to private mortgages to rent-to-own options. If you would like to learn about these strategies for yourself, call us today at 1-800-429-0717.