Low interest rates have a growing number of millennials buying homes instead of renting, but lenders need to be careful, warn industry analysts.
“Don’t be swayed here by arguments that the cost of financing a mortgage is so low,” writes Rob Carrick, a columnist for the Globe and Mail
, arguing that unless economic conditions improve the job market, millennials will continue to struggle to make monthly mortgage payments or rent.
Still, one broker is pointing out that the prices in his province of Alberta are making home purchases increasingly logical for millennials, despite uncertain economic times.
“They think prices are good now,” Steven Crews of Verico
iMortgage Solutions told MortgageBrokerNews.ca
. "And if it’s going to be a principle residence, you’re going to pay whether its rent or a mortgage.” The one caveat being employment
Still, in hot markets such as Toronto and Vancouver, the overall trend is toward higher prices and that’s turning people into long-term renters.
A Desjardins Group report shows that in the first quarter of the year, 12 of the 18 cities measured by its index are less affordable than they are historically, with rising prices spreading out from Toronto to St. Catharines.
While interest rates may be making home ownership a bargain, the skyrocketing prices of homes in cities such as Toronto and Vancouver are making monthly mortgage payments difficult. The fact is millennials may be too stretched to save for home purchases.
A Vancouver company – RentMoola – has signed up more than 5,000 people allowing them to pay their rent with a credit card, with the majority of its users consisting of millennials.