Survey indicates Canadians ready for home-buying spree


As the Canadian economy shows signs of growth, results of a new survey indicate that intentions to purchase a house or condo have risen to 14 per cent nationally, compared to 11 per cent last September. 

However, the majority of that demand remains unsatisfied, as nearly two-thirds of those who were planning to purchase six months ago have still not bought, according to the TNS Canadian Facts’ economic tracking survey, TNS Vibe.

“In spite of some softness in April, consumer confidence has risen considerably over the quarter and is now higher than it has been since the downturn began in the fall of 2008,” said Brook Tyler, the research director of TNS Canadian Facts and a member of the firm’s financial research practice. “It is encouraging to note that a number of Canadians are thinking seriously about getting into the real estate market.”

The survey was conducted prior to new down payment restrictions that took effect April 19, as well as before some of the major banks announced increases in mortgage rates, citing higher borrowing costs on the bond market which provides funds for mortgages.

The advertised five-year conventional mortgage rate stood at 5.85 per cent at the end of April, which is up 0.4 per cent from a year earlier, and is 0.46 per cent above where it stood in March.

Locally, WinnipegREALTORS® reported home sales in April rose 15 per cent from the same month last year. 

Claude Davis, president of Winnipeg REALTORS® said the increases in interest rates have been a factor in the home buying spree, as has consumer confidence and the province’s strong economy. 

In fact, he added, Winnipeg and Manitoba emerged from the recent recession relatively unscathed and the housing market didn’t experience the extreme downturns of other Canadian markets such as Vancouver, Calgary and Toronto.

Improving credit market conditions have enabled lenders to reintroduce discounts off posted mortgage interest rates, according to the Canadian Real Estate Association. Discounts of about one percentage point can be negotiated, depending on lender-client relationship.

In the meantime, the Bank of Canada has maintained its interest rate.

“The April interest rate announcement (of maintaining the same rate) all but guarantees the bank will raise rates in June,” said the CREA’s chief economist Gregory Klump.

While Canada Mortgage and Housing Corporation’s new down payment restrictions should have a mild dampening effect on the market, according 

to Tyler, the prospect of further interest rate hikes will likely motivate some of those who have been taking a wait-and-see approach to actually get into the market before rates rise further.

The economic downturn has changed the nature of homeownership. 

“In addition to delaying home purchases, home mortgages have also been impacted as Canadians have tried to trim their spending,” said Tyler. 

“Among Canadians with a mortgage on their principal residence, more than two in five have attempted to make cutbacks on their mortgage. 

“However, the worst appears to be over. Currently, only about one in five mortgage holders report that they are still hoping to make further cuts in their mortgages,” added Tyler.

An April CMHC survey found 81 per cent of recent home buyers are comfortable with the level of their mortgage debt, and two-thirds indicated there is a strong chance their mortgage will be paid off sooner than expected.

According to the CMHC 2010 Mortgage Consumer Survey, more than a quarter have already taken steps to pay down mortgage through lump-sum payments or through increased regular payments.

The TNS survey examined strategies of Canadian mortgage holders to control their mortgage-related spending; specifically, one in 10 have made extra payments to pay down their mortgage faster, 13 per cent have renegotiated for better payment terms, and five per cent have switched from a fixed-rate to a variable-rate mortgage.

Clearly, some of this behaviour may have been fuelled by anxiety, as 12 per cent mention being worried about missing a mortgage payment, and four per cent purchased mortgage insurance. However, only four per cent report having actually missed a payment.

“One of the consequences of the prolonged economic downturn is that many consumers have been taking a ‘wait-and-see’ approach to the housing market,” said Tyler. 

“Attractive interest rates, coupled with a more sanguine view of the economy, suggest that consumers are more than ready to act. Indeed, 12 per cent of Canadian renters report that they are more likely to take out a mortgage in the near future to take advantage of current rates, and more than one in five mortgage holders are planning to renew early or renegotiate to take advantage of current rates. 

“As the economy regains strength, potential mortgage customers will want the assurance that they are not overextending themselves and that their financial institution is willing to provide support in the way of sound financial advice,” added Tyler.