VANCOUVER (NEWS 1130) – A shocking number of first-time home buyers are having trouble making their mortgage payments.
The latest survey by Canada Mortgage and Housing shows one in four are worried about them. It finds that 80 per cent of more than 4,000 home buyers polled still believe property is a good long-term investment, but 85 per cent admit they maxed out their budgets.
The findings from this research doesn’t surprise North Vancouver-based money coach Christine Williston. She says people have put too much money toward purchasing a new house, and as interest rates go up, they are feeling squeezed.
“Entirely maxing out your mortgage and buying the biggest house that you can possibly afford is a dangerous game,” she says. “If you haven’t left yourself any wiggle room for rising interest rates -unexpected expenses – you’re living in a dangerous spot.”
She also supports new stress tests making it harder for first-time buyers to get into the market.
Kelley Keehn, a personal finance educator, says she’s actually surprised 76 per cent of are confident they can make their payments.
“I wonder how much of that is over-confidence? I mean, obviously, it didn’t dig into did these individuals get help from their parents, but the reality is 50 per cent of Canadians are $200 away from not being able to pay their bills,” she says.
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More than half of those in the survey who said they were concerned, say they are most worried about unforeseen costs, paying too much for their home and rising interest rates.
The Bank of Canada raised its interest rate target up four times since July 2017, and it could be raising it again Oct. 24.
National home sales fell in September for the first time in five months, weakening markets in Vancouver, according to a report from the Canadian Real Estate Association.
Although prices are flattening, the outlook on Canada’s real estate market is still positive.
The B.C. President of the Canadian Mortgage Brokers Association Troy Resvick believes new federal stress tests are making it too hard for some people to even get into the market.
“We definitely don’t want to see buyers halted from being able to achieve the Canadian dream of owning a home,” he says. “While I understand the mandate of trying to make sure that we don’t end up in a financial crisis like we saw a decade ago in the U.S., the dynamics are significantly different.”
Resvick, who’s been a mortgage broker for 15 years, adds many of his clients are reaching out to him for advice on how to avoid trouble.
– With files from the Canadian Press