More than 1 in 4 renters (~28%) are planning to buy a home in the next two years—according to a recent studycommissioned by The Mortgage Group (TMG).
In this recent article in Canadian Mortgage Trends http://tinyurl.com/6qxyutg, prospective buyers think mortgage brokers are a good source for information. They are considering how mortgage flexibility is just as important as rates.
Of those surveyed, more than half (54%) said they would likely buy sooner if they expected interest rates to rise 2% or more in the next year.
This buy-before-rates-go-up philosophy is not surprising. A two percent rate increase would cost a borrower over $30,000 more on a 5-year fixed mortgage (assuming an average priced home, 10% down and a 25-year amortization).
While the fear of future rate hikes often drives consumer psychology, a budding homebuyer may also want to consider the:
- Size of his or her downpayment andemergency fund (there's nothing like the stress of being house poor)
- The likelihood of rates increasing anytime soon (If they don't, as many expect, it permits more time to save for one's down payment and closing costs.)
- The possibility that home prices will fall or rise further in two years (e.g. a 10% price drop could potentially offset the benefit of buying before a 2% rate hike)
Going back to the above-referenced study, the report had some other notable stats as well:
- 68% of renters said they intend to get their information about mortgages from a mortgage broker, while slightly less (66%) said they would contact their bank.
- 34% ranked flexibility as the most important factor in choosing a mortgage, while 33% said getting the lowest possible rate is most important to them.
- 91% of renters planning on buying would use a mortgage broker. “Buyers recognize mortgage brokers provide a fast, efficient way to access a wide variety of mortgage options and solutions, in most cases at no additional cost,” Kerzner said.
- 79% of renters planning on purchasing consider themselves educated in the buying process and said they are aware of being able to access their RRSPs as part of their down payment.
