24 May 2011
But still, Altus Group says that even despite low interest rates, the market conditions for first-time buyers are a bit worse now. Partially, it’s because of today’s house prices and the consequences of recent mortgage rule changes.
The CREA’s economist, Gregory Klump, also believes that new mortgage rules have had an immediate impact: “April changes to mortgage regulations have already sidelined a number of first-time homebuyers”.
Renters aren’t very optimistic about the future either. According to Altus Group, first-time buyer intentions among this group are down from a year ago. Moreover, the results are even lower than the 2002-2009 average. And again, new mortgage rules are named among the main reasons for that.
Actually, the reduction of maximum amortization is considered to have the most significant impact. CAAMP said that 41% of home buyers in the last 16 months have already chosen extended amortizations (more than 25 years). If we include first-time buyers, the percentage will be even higher, especially in Vancouver and Toronto.
It means this reduction cuts the average buyer’s maximum purchase price by about 6-7%.
And, of course, shorter amortizations make borrowers choose cheaper houses. TD’s recent report shows that 63% of younger buyers name the loss of 35-year amortizations as a reason to choose a condo and not a house.
Here are some other interesting numbers from Altus Group’s report:
• The age of 60% first-time home buyers was about 25-34 years.
• 25% were aged between 35- and 49-years-old.
• The average price for a house bought recently by a first-time buyer was $273,000. It’s four times the average annual household income of $69,000.