Only 55 per cent consider their mortgage payments manageable, BMO finds
Michael McCullough
Sun
One in six Canadian home buyers has trouble handling the payments and Vancouverites are among the most likely to feel “house poor,” according to a new study.
A BMO Bank of Montreal survey of more than 1,000 Canadians released Tuesday indicates 16 per cent of first-time home buyers found their financing difficult to manage.
Among all respondents who had bought a home in the last 10 years, 15 per cent in Vancouver said they faced difficulties handling their mortgage payments, compared with 14 per cent in Toronto, 12 per cent in Calgary, and just six per cent in Halifax.
The survey also showed 77 per cent of recent house hunters did not seek any advice from a financial professional prior to making their purchase.
“What’s surprising about these findings is the number of people who don’t seek any financial advice from experts on the biggest investment they’ll ever make, and that could be a big mistake,” said BMO vice-president, personal banking Maria Racanelli in a press release.
It’s one thing to get a competitive mortgage, but quite another to make the payments fit with family finances, she said.
While just one per cent of Vancouver respondents said their home payments were making them house poor — meaning they had little disposable income — more than 13 per cent said home payments are a large and sometimes difficult-to-manage portion of income.
Just 55 per cent of Vancouverites surveyed considered their home payments manageable — the lowest of five cities studied — and 23 per cent said their payments represented a small portion of their income.
Still, the proportion of Vancouverites comfortable with their home financing was closer to the national average (78 per cent versus 81 per cent) than the relative affordability of homes here would suggest.
In a survey of housing affordability conducted by RBC Financial Group in the fourth quarter of 2004, average home ownership costs represented 47.7 per cent of average household income in Vancouver, compared with 33.3 per cent nationwide.
What people consider house poor may differ from city to city and Vancouver homeowners may be inured to higher housing costs, Racanelli suggested in an interview. The BMO survey reflects people’s feelings rather than objective circumstances.
“It’s an emotional response to a straight question,” she said.
Because this was the first time BMO had asked the question, she could not say whether the comfort level with home ownership costs had decreased or increased over time.
Vancouver home buyers were the least likely in Canada to look for a mortgage at their bank (34 per cent) and the most likely to use a credit union (13 per cent), and among the most likely to opt for a mortgage broker (32 per cent).
Among first-time buyers who did seek financial advice before buying, the most-cited sources of information were friends and family members (32 per cent), real estate agents (23 per cent) and mortgage brokers (22 per cent), with just 16 per cent speaking with a personal financial planner.
Buyers should speak to someone who can anticipate their life changes, Racanelli said.
“You wouldn’t go to a dentist for a problem with your knee,” she said.
The survey results are considered accurate within 3.1 percentage points 19 times out of 20.
SLAVE TO MY MORTGAGE:
With home values continuing to rise across Canada, many buyers are ‘house poor,’ with little discretionary income.
Percentage of recent buyers who find their payments difficult to manage:
Vancouver 15%
Calgary 12%
Toronto 14%
Montreal 9%
Halifax 6%
Source: BMO Bank of Montreal, Vancouver Sun
© The Vancouver Sun 2005
