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Cheaper Homeownership Lures First-Timers

First-time-mortgage It’s sometimes interesting to look back on mortgage markets of yesteryear. In this case we’re going all the way back to September 2008.

In the first week of September, a good discounted 5-year fixed mortgage could be had for around 5.50%.  Today, rates are 3.75% or lower.

That’s a big change in a small amount of time, and it’s coming at a welcome time for the real estate industry.  From a housing demand perspective, any change is welcome right about now.

The changing cost dynamics are especially good for first-time buyers, which some feel are critical for turning our market around.

For most new buyers, apart from 1.8% higher unemployment, things are looking better than they did eight months ago.  CREA says “Buyers, especially first-time buyers, are being lured by historically low mortgage rates, greater affordability and increased supply.”

Phil Soper, chief executive of Brookfield Real Estate Services, agrees.  “The uptick in first-time home buyer purchases across the country is quite astonishing,” he says.

This trend is being stoked by improvements in affordability. For example, the payment on a $200,000, 35-year amortized mortgage was 20% more in September than it is today.

To qualify for that mortgage one also needed 20% more income than is necessary today.  For many first-timers, money is tight, so these affordability improvements can mean the difference between renting and buying.

The drop in home prices isn’t hurting new buyers either.  TD estimates the average Canadian home has fallen 13.3% in value from the peak 17 months ago.  That further reduces the cost of carrying a new home—in some markets, significantly.

We haven’t even got into all the tax credits, Home Buyers Plan enhancements and other lures for first-timers.

Suffice it to say, opportunity is knocking for first-time buyers.  While only time can tell, some feel it’s time to answer.