72 per cent of aspiring homeowners in Canada are waiting for rate cuts before purchasing a home – BMO Survey

The BMO Real Financial Progress Index reveals the majority (72%) of aspiring homeowners are waiting until interest rates drop before purchasing a home – a 4% increase from 2023 – amid rising concerns about the cost of living (58%), inflation (56%) and their overall financial situation (38%), over the past three months.

According to BMO Economics, homebuyers may need to wait longer for affordability relief. The Bank of Canada left interest rates unchanged in April, but left the possibility open for a rate cut by June or July 2024.

“Demographic forces have allowed some pent-up demand to build, and market psychology is such that many are expecting rate cuts in the second half of the year. This should pull some demand off the sideline and firm up housing activity, but rates have a long way to fall still before affordability is restored to recent norms.”

– Robert Kavcic
Senior Economist, BMO Capital Markets

The BMO Real Financial Progress Index found 85% of Canadians believe they are making real financial progress and over two thirds (67%) feel confident in their financial situation, but fear of unknown expenses (84%) and concerns about their overall financial situation (81%) and housing costs (74%) are among the leading sources of financial anxiety.

Top economic and environmental concerns affecting Canadians’ homebuying decisions include:

• Redefining the Canadian Dream: While 62% believe owning a home is one of their biggest aspirations in life, 56% of aspiring homeowners feel homeownership is unattainable.
• Pent Up Demand: Among the 39% of aspiring homeowners planning on purchasing a home in the near future, only 13% plan to in 2024 and more than a quarter (26%) plan on doing so in 2025 or later.
• Reexamining Refinancing: Nearly three quarters (74%) of homeowners who plan to refinance their home say they will wait until mortgage rates drop before refinancing.
• Climbing Climate Considerations: 39% of Canadians say climate-related factors such as wildfires, floods, heatwaves, and storms will affect where they choose to live in the next five years. Gen Z (54%) and Millennials (49%) are the most likely to prioritize climate-related factors in their homebuying decisions.
• The Cost of Homeownership: 41% say rising home insurance costs may affect their ability to maintain or buy a home.

“Homeownership is more than a milestone. Homeownership represents the achievement of real financial progress, security and wealth creation for many Canadians and their families. As many first-time homebuyers wait for their chance to enter the market, we encourage Canadians to get started on their homebuying journey by meeting with a professional advisor or planner to learn more about the different paths to homeownership and build a personalized financial plan that can incorporate tools to get them on track towards their financial milestones.”

– Gayle Ramsey
Head, Everyday Banking Segment & Customer Growth, BMO

Paths to Homeownership for the Next Generation

As Gen Z and Millennials[1] look forward to achieving their next financial milestone, the survey found they are approaching homebuying differently than other generations:

• Homeownership is Where the Heart is: Despite their concerns about the economy and cost of living, Millennials (70%) and Gen Z (68%) are the most likely to believe owning a home is a big aspiration in life.
• Chasing the Canadian Dream: While over half of Gen Z (51%) and Millennials (56%) aspiring homeowners plan on purchasing a home in the future, 33 per cent of Gen Z and 37% of Millennials believe this goal will not be achieved until 2025 or later – more than any other generation.
• Bank of Mom & Dad:
  • Gen Z (52%) and Millennials (31%) are the most likely to expect to receive and/or plan to ask for financial help from their parents and/or grandparents, with 16% of Gen Z and 12% of Millennials looking for support towards a downpayment for a home.
  • Millennial parents (54%) are the most likely to provide financial support to their adult children, where a third (33%) intend to help their children with their home purchase including a cash contribution towards a downpayment for a home (23%).

“Despite the economic and market challenges, there are still many young Canadians preparing to embark on their homebuying journey and enter the real estate market for the first time.  BMO’s online tools and resources can help Canadians wherever they are in their homebuying journey, from giving buyers a better understanding of their budget at the start to providing more clarity about what they can afford and the carrying costs they should be considering.”

– Hassan Pirnia
Head, Personal Lending and Home Financing, BMO

To learn more about how BMO can help customers make financial progress, visit www.bmo.com/main/personal.