Opportunities exist – but advice of seasoned professionals essential, says broker
The federal government’s decision to axe the First-Time Home Buyer Incentive (FTHBI) shone a light once more on the affordability challenges facing new entrants to the market – but purchasing a home shouldn’t be an impossible task for those buyers at present, according to a top mortgage broker.
Chris Bargis (pictured top) of Mortgage Edge told Canadian Mortgage Professional that the likelihood of lower interest rates down the line in 2024 meant first-time buyers and younger Canadians could see some much-needed relief on the affordability front.
Speaking in late February, Bargis pointed to a lower stress test qualifying rate thanks to falling interest rates on the fixed side as a cause for optimism for new buyers.
“I would say probably about 40% of our portfolio is first-time buyers,” he said. “And the prospects for first-time buyers, I think, are positive, all things being equal with the anticipated rate declines and the mortgage stress test, of course. First-time homebuyers should technically have better prospects with qualification on the mortgage front.”
Still, a caveat: a spike in demand for homebuying would likely transpire if rates start to fall, meaning prices could also rise and first-time buyers may not necessarily find themselves in a significantly better position.
Home sales fell across Canada in February, the first time for three months activity has dipped after a surge at the end of last year and beginning of 2024.https://t.co/ndNA36d4Yr#breakingnews #mortgageindustry #homesales #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) March 18, 2024
Why dealing with mortgage brokers is more important than ever
The still-uncertain outlook for first-time buyers underscores the need for borrowers to deal with a seasoned financial and mortgage expert at each stage of their homebuying journey, according to Bargis.
“I think what will make the first-time homebuyer better equipped is just seeking that stewardship from a professional, be it their bank or a mortgage professional,” he said.
It’s also essential that they account for the fact that qualification requirements at many of the country’s top institutional lenders have tightened, bringing about a shift in the type of financing many new buyers need to turn to.
“Getting in tune with changing risk appetites from financial institutions and speaking to a professional is really what’s going to help arm them,” Bargis said. “This applies to any buyer, not just first-time buyers – it’s especially important for them to speak to professionals.
“We find that institutions and banks are tightening up a little bit with their credit policies. They don’t really see us as being at the end of these turbulent times, even though from the front and end from feet on the street I see a reasonably balanced market.”
That wariness from the top banks, and a reticence to lend in many cases, means it’s doubly important for prospective borrowers to speak with a mortgage agent to get the best possible advance on the type of financing that’s right for them, Bargis said.
What’s in store for Canada’s spring housing market?
In its latest report on the outlook for Canada’s housing market, Royal Bank of Canada (RBC) noted that buyer and seller sentiment appears to be improving – but that the country faces a slow march back towards rosier times.
“We think February’s developments point to a bumpy ride for the market in the months ahead,” the bank’s assistant chief economist Robert Hogue wrote. “While the tightening of demand-supply conditions since December has paved the way for modest price appreciation, resales are likely to bounce around amid a standoff between buyers and sellers.”
New listings rose for the second month in a row in February, Hogue noted, in a possible indication that sellers are starting to feel “increasingly confident” about the sales outlook.
Ominously for new buyers, prices across the country are beginning to stabilize, with the national composite MLS Home Price Index benchmark remaining largely unchanged from the prior month at $719,400.
That represented the first time since August that it didn’t tick downwards month over month – “and with demand-supply conditions having rebalanced significantly since December, we think prices may have reached an inflection point – at least nationally,” Hogue said.
Still, homebuying is likely to remain subdued in the spring, he added, with sellers and buyers locked in something of a standoff until rates begin to fall further later in the year.
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