• 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.”

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 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.

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 28^th to March 18^th, 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.

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

Featured image: Megapixl © Bagwold

Disclaimer