Home ownership is proving to be a chief source of financial hardship for a significant portion of Canadians, according to the latest CMHC mortgage survey.
“One of the biggest stories of 2019 was the dramatic decrease in the number of homebuyers who chose to spend the maximum amount they could afford on their home. This suggests that many Canadians may be shying away from the ‘house-rich, cash-poor’ approach of past years,” CMHC stated in its report.
Last year, as much as 78% of home buyers acquired the highest-priced home they could afford. The proportion fell to just 60% in 2019.
Also, nearly one third of buyers spent $300,000 to $499,000 on their purchases this year, while only around 1 in 5 buyers spent more than $500,000.
This came with intensifying consumer debt, which “continues to be a significant challenge in nearly every part of the country. The impact of those debts also continued to spill over into the mortgage markets,” CMHC warned.
Around 23% of buyers in 2019 admitted that their current debt levels were higher than they could have anticipated, up from 19% last year.
This led to 59% deciding to cut back on non-essential expenditures ever since buying a home, with the most common items to be stricken off the budget being entertainment (66%), vacations (55%), and food (44%).
In general, Canadians have become more wary of hidden costs, as well. This year, around 56% of those polled consulted with their mortgage professionals regarding unexpected costs, compared to 48% in 2018.
One-third (33%) of respondents said that they ended up needing to absorb some of those costs – most notably, in home repairs, adjustments, and legal fees – in 2019, compared to just 25% of buyers last year.