More than 1 in 4 renters (~28%) are planning to buy a home in the next two years—according to a recent study commissioned by The Mortgage Group (TMG).
TMG’s president, Mark Kerzner, said that could translate into about 12% growth in homeownership.
Of those surveyed, more than half (54%) said they would likely buy sooner if they expected interest rates to rise 2% or more in the next year.
This buy-before-rates-go-up philosophy is not surprising. A two percent rate increase would cost a borrower over $30,000 more on a 5-year fixed mortgage (assuming an average priced home, 10% down and a 25-year amortization).
While the fear of future rate hikes often drives consumer psychology, a budding homebuyer may also want to consider the:
Size of his or her downpayment and emergency fund (there’s nothing like the stress of being house poor)
The likelihood of rates increasing anytime soon (If they don’t, as many expect, it permits more time to save for one’s down payment and closing costs.)
The possibility that home prices will fall or rise further in two years (e.g. a 10% price drop could potentially offset the benefit of buying before a 2% rate hike)
Going back to the above-referenced study, TMG’s report had some other notable stats as well:
68% of renters said they intend to get their information about mortgages from a mortgage broker, while slightly less (66%) said they would contact their bank.
34% ranked flexibility as the most important factor in choosing a mortgage, while 33% said getting the lowest possible rate is most important to them.
91% of renters planning on buying would use a mortgage broker. “Buyers recognize mortgage brokers provide a fast, efficient way to access a wide variety of mortgage options and solutions, in most cases at no additional cost,” Kerzner said.
79% of renters planning on purchasing consider themselves educated in the buying process and said they are aware of being able to access their RRSPs as part of their down payment.