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First-time home buyers borrowing from family to come up with down payment
Nov 20, 2014

First-time home buyers on average make a 21 per cent down payment on the purchase of their new home. And since the 1990s, about 40 per cent of this has come from personal savings, suggesting Canadians wait to be financially stable before purchasing a home. 
But recently, as house prices have risen, 17 per cent of the down-payment has come from family gifts or loans, which is a higher number than in previous years. 
These are just some of the facts found in the Annual State of the Residential Mortgage Market in Canada, the latest consumer survey report released today by the Canadian Association of Accredited Mortgage Professionals (CAAMP).
The report probes into how Canadians are managing their mortgage debt. 
In this low interest rate environment, they continue to aggressively pay down their mortgages, even though most who are renewing their mortgages are going to find interest rates unchanged or lower than their current rates.
Questions related to why people do not own a home produced interesting results: the majority of people 18 to 34 years of age indicated they were waiting for prices to fall and savings to increase. 
At the other end of the age spectrum, more than two-thirds of those over 55 years old said they were renting because it was a better option for them.
Highlights of the survey:
• About 425,000 Canadians live in homes that they purchased during 2014 (up to the time of the survey).  The average price was just over $400,000, for a total value of $173 billion.
• About 125,000 Canadian homeowners fully repaid their mortgages during 2014 (up to the date of the survey). A further 50,000 to 75,000 expect to fully repay their mortgage before the end of 2014. In combination, about 190,000 mortgages will have been fully repaid during the year.
• About 900,000 current mortgage holders made lump sum payments in the past year, totaling $16 billion.
• Among the 190,000 to 200,000 Canadians who have repaid (or are expected to repay) their mortgages during 2014, lump sum payments total about $5 billion.
• About 900,000 mortgage holders voluntarily increased their regular payments during the past year, by amounts that equate to more than $3 billion per year.  
The average mortgage interest rate is 3.24 per cent, identical to CAAMP’s spring survey and down from the average 3.5 per cent found in the fall 2013 survey.
On average, Canadian home equity amounts to 74 per cent of the value of their homes.
About 11 per cent of homeowners took equity out of their homes, using the money for debt consolidation and repayment, renovations, investments, purchases, including education, and “other.”
“Overall, the CAAMP fall report paints a picture of homeowners whether just starting out on their ownership journey or long time mortgage holders, as remarkably confident,” said Jim Murphy, president and CEO of CAAMP. 
“They wait until they are financially stable before buying, and they take advantage of low interest rates to aggressively reduce their mortgage debt. Homeownership continues to be an important anchor for the Canadian economy,” he added.
CAAMP's research, tabulated by chief economist Will Dunning, indicates that the vast majority of homeowners are happy with their decision to purchase a home. In total, 91 per cent of Canadians were happy with their home-buying decision.
Dunning said the the significant rise in resale activity between 2008 and 2014 was clearly related to the drop in mortgage interest rates.
Although there was a dramatic drop in existing home sales in mid-2012, it resulted solely from the federal government’s decision to eliminate mortgage insurance for mortgages with an amoratization period exceeding 25 years.
“A shortening from 30 years to 25 years had the same impact on monthly payments as a one percentage point rise in the interest rate — this knocked thousands of potential buyers out of the housing market,” Dunning wrote in the report.
On the other hand, Dunning said that the policy change had little impact on Manitoba’s resale activity.