Despite a tricky economy and concern about climbing household debt, a survey says the portion of Canadians who are “very likely” to purchase a home in the next two years has increased from 7 to 10 percent since the same question was posed two years ago.
The media has been full of speculation about house prices being unsustainable in Canada, but the lure of homeownership remains strong among those surveyed by Ipsos-Reid on behalf of RBC. An overwhelming 91 percent of Canadian homeowners believe a home is a good investment. That’s the highest level of confidence in homeownership that the survey has seen in 12 years. This was the 17th annual RBC Homeownership study. People aged 18 to 24 are most likely to buy in the next two years, says the survey.
Marcia Moffat, RBC head of home equity financing, says that “the expectation of higher mortgage rates on the horizon could be motivating buying intentions this year.” Low mortgage rates continue to fuel the real estate market, but the survey found that 64 percent of respondents believe that rates will be higher in one year’s time. They are expected to start rising gradually at the end of 2010 and into 2011, but will probably still be near historic lows.
RBC says first-time buyers should lock in their interest rate when they apply for a mortgage to avoid expected increases. It says buyers should “stress test” their mortgage, by figuring out what payments would be required if rates rise, and then determining if the home they want is affordable at that level. Buyers should leave some “wiggle room” to ensure they can comfortably afford their mortgage while enjoying the lifestyle they want.
For homeowners who are renewing their mortgages, RBC suggests taking advantage of early renewal options that lock in the new mortgage rate. Sixty-three percent of those surveyed said they are taking advantage of low interest rates to pay down more principal on their mortgages. Eighteen percent used a lump sum payment to pay down their mortgage and 16 percent were able to double up a mortgage payment.