Many Canadians are delaying their intentions to buy a home due to rising mortgage rates and an overall greater cost of living.
According to the findings of a new survey commissioned by Royal LePage and carried out by Leger, nearly one in five Canadians (19%) indicate they intend to “delay or de-prioritize” the purchase of a home.
For people between the ages of 18 and 34, that ratio jumps to almost a third (29%) of the population.
Since the cost of borrowing started to rapidly rise starting in March, a sizable chunk of prospective homebuyers have left the market. Daily costs have increased, and compared to times of pandemic lockdown, Canadians now are saving less and spending more on services, such as entertainment and tourism.
A majority (60%) of those who stated they were postponing their purchase claimed they had put their plans on hold forever. The remaining 40% stated that they still plan to purchase, but later.
The results represent an improvement over those of a comparable Scotiabank study that was done back in April.
43% of respondents stated they were delaying their plans to buy a home at that time, when rate hikes were just starting. Between the ages of 18 and 34, about half of respondents stated they were rethinking their purchase intentions.
Higher Interest Rates Hurting Affordability
Given that loan rates are still rising and home prices are declining, it is not surprising that many would-be homeowners are delaying their purchases for the time being.
The Bank of Canada has increased its benchmark lending rate since March, bringing it to 5.49%.
The carrying cost of variable-rate mortgages and lines of credit has sharply increased as a result. The rise in bond yields has been driving up fixed mortgage rates since the beginning of the year.
While a decline in affordability was caused by quickly growing housing prices for a big portion of the pandemic, high mortgage rates are now mostly to blame.
National Bank of Canada reports that in the second quarter, just as home prices peaked and as interest rates began to rise, housing affordability fell to its lowest point in 41 years.