MNI ANALYSIS: Canada Homebuyers Cut Back on Affordability Pain

--Canada Mortgage & Housing Corp. Survey Also Shows Borrowing Risks Linger

By Greg Quinn

     OTTAWA (MNI) - Canadians are paring back on jumbo home purchases while

continuing other risky behaviors through a housing boom that pinched

affordability and led regulators to tighten lending standards, a new government

survey out Friday shows.

     Some 60% of buyers spent as much as they could afford on a home this year,

down from 78% in 2018 according to an online survey by Canada Mortgage and

Housing Corp. Affordability was also listed as the most common "need" among

buyers at 80%, while the share calling their top "want" a "move-in ready" home

dropped to 6% from 11%.

     Overstretched consumer finances are one of the big risks facing Canada even

with policymakers saying a tougher mortgage stress test introduced in 2018 took

much of the froth out of the Vancouver and Toronto markets. The Bank of Canada

decided against following most other central banks in cutting interest rates

this year, in part due to the potential to re-ignite the boom, and says consumer

debts will remain elevated for some time. 

     The majority of buyers surveyed still aren't aware that mortgage rules were

tightened in response to the market strains, though the share climbed to 59%

from 52% of those asked.  

     Bidding wars that defined the boom in Canada's biggest cities remain. Some

24% of those asked nationwide said they were in a bidding war this year. 

     Almost the same share of respondents said their current debt level is

higher than they were expecting, with this year's figure of 23% up from 19% in

2018. 

     "Consumer debt continues to be a significant challenge in nearly every part

of the country," the CMHC report said.

     Household debts bigger than the country's GDP could impair spending that

has fueled the economy amid sluggish exports and investment. About six in 10

buyers have cut back on other spending since buying a home, most often on

entertainment, vacations and food, the survey found. 

     There is also still appetite for looser mortgage rules even as regulators

have clamped down. Half of respondents have a mortgage amortized over 25 years,

and seven in 10 say they would prefer an even longer timeframe. 

     The CMHC based the online survey on 1,385 respondents who made a mortgage

transaction in the past 12 months, and the Ottawa-based agency has done such

work since 1999. 

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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