In fact, of those B.C. homeowners answering an ING Direct poll in March, some 52% said they’d placed a down payment of more than 20% on their homes. Of homeowners in Ontario, only 41% opted for conventional mortgages. In Alberta, that figure falls another 10% to 31, with Quebecers following at 27%.
The survey results may challenge what mortgage brokers think they know about their respective markets. They also illustrate the demographic challenges facing brokers who focus on servicing first-time homebuyers in Ontario and other eastern markets where the number of young people hasn’t kept pace with aging baby boomers.
That’s not the case in Alberta, where only a third of the survey’s respondents took out a conventional mortgage. The level of high-ratio mortgages, said one Calgary broker, isn’t necessarily a bad thing.
“The big thing in Alberta is that there is a lot of young people here, a younger workforce, and it would take them quite a long time to save up 20% of the average home price,” said Tom Lam, president of Urban Mortgage, a brokerage with associates across Alberta. “As a result, we have a lot of first-time homebuyers getting into the market, and high-ratio mortgages are very important, because first-time homebuyers are helping to drive the economy.”
Lam argues that the income of those workers and the growing global demand for Alberta oil means young homeowners should be able to absorb the kind of rate increases expected later this year. That’s even if the market suffers the kind of value slides it did in 2010.
But economists aren’t predicting a cooling in Vancouver, where the average home price hit the $1 million mark in January. That growth has led to some of the highest home-price-to-income ratios in Canada. Still, the popularity of conventional mortgages among British Columbians isn’t surprising, said one Vancouver broker.
“We have a mixture of buyer types here, from first-time to those using the equity from their first home to purchase the second,” Ajit Hundal, a broker with TMG The Mortgage Group, told MortgageBrokerNews.ca. “In Vancouver we also have a lot of new immigrants, foreign money, that may not qualify for high-ratio mortgages, and they have to go the conventional route.”
They may not be reflected in the ING Direct online survey of 1,062 people. All were Angus Reid Forum panelists and all were Canadian. Still, the findings suggest homeowners across the country are more conventional than the current crop of buyers. While a third (36%) of those Canadians now carrying a mortgage have a conventional one, only 21% of those looking to take the plunge in the next six months plan to follow suit.
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