Broker: BMO report “whistling Dixie”

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Tuesday’s BMO report on first-time homebuyers paying an average $48,000 down on a $300,000 home is unrealistic, says one Barrie broker.

“I think they are whistling Dixie,” says Jerry Rose, a broker with Verico Allendale Mortgage Services. “BMO’s numbers for what is an average down payment isn’t what I’m seeing.”

The BMO First-time Home Buyer’s Report also revealed that on average, first-time home buyers expect to be mortgage-free in 20 years, with 20 per cent estimating it will take between 10-19 years.

But those numbers are optimistic at best, says Rose.

“I’m seeing first-time homebuyers only able to put down a 5 to 10 per cent,” he told MortgageBrokerNews.ca. “I had one young man buying a home who can only put down 5 per cent on a $300,000 mortgage ($15,000), but it will still be a struggle when you include the 1.5 per cent closing costs, and probably CMHC will hold back 50 per cent of the taxes. That is the reality for most first-time homebuyers.”

Other results from the BMO report show 59 per cent of first-time buyers have had to hold off buying their first home because of increasing housing prices, wishing they had bought their first home five years ago.

“Buying a home is one of the most important financial decisions one can make.  It’s crucial that those planning to enter the market are well prepared – not only to manage their costs, but also to pay off their mortgage as soon as possible,” said Laura Parsons, a mortgage expert with BMO. “Determining what your mortgage payments and overall costs of home ownership will look like, and then living in that financial reality for a year before entering the market, can be an effective strategy.”

According to the report, two-thirds of first-time buyers (66 per cent) say the latest changes to mortgage regulations – which included reducing the maximum amortization for government-insured mortgages to 25 years from 30 years – have not affected their buying timeline, while one in five (19 per cent) say they will have to wait longer before buying as a result.

“A shorter amortization is the most responsible approach to home financing,” argues Parsons, reiterating the bank’s support of the 25-year cap. “It’s something BMO has been encouraging their customers to consider for years, as it means becoming debt-free sooner.”

For Rose, the large number of those surveyed who are holding off buying a new home does make sense.

“A lot of my job is counseling first-time buyers, telling them what they need to do to be in the position to buy a house six months or a year down the road,” he says. “Owning a home is the best security young people can have – the government needs to make it easier for Canadians to do that.”

 

  • Paolo Di Petta | dipettamortgage.com on 2013-04-12 12:40:37 PM

    lol. According to BMO, first time home buyers expect to spend $300k on their first home, but the average home in the GTA is over $500k. Obviously, a 'starter home' should be less than an average home, but you can't get anything halfway decent around here for 300k.

    This just goes to show you whether these bank "reports" are worth reading, or just more PR fluff.

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