{"id":7337,"date":"2018-04-26T06:01:54","date_gmt":"2018-04-26T10:01:54","guid":{"rendered":"http:\/\/business.financialpost.com\/?p=1581158"},"modified":"2018-04-26T08:33:35","modified_gmt":"2018-04-26T12:33:35","slug":"mortgage-stress-tests-have-squeezed-millennials-homebuying-budgets-by-40000-study","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2018\/04\/26\/mortgage-stress-tests-have-squeezed-millennials-homebuying-budgets-by-40000-study\/","title":{"rendered":"Mortgage stress tests have squeezed millennials\u2019 homebuying budgets by $40,000: study"},"content":{"rendered":"<p>The homebuying budgets of Canadian millennials shrank by 16 per cent or just over $40,000 following the introduction of tougher mortgage qualification rules in January, according to a new study.<\/p>\n<p>And young buyers are increasingly responding to these tighter budgets by pooling money with partners, sitting on the sidelines of the market a little longer or turning to parents for financial help in order to make a purchase.<\/p>\n<p>&nbsp;\u201cFor peak millennials, the group which makes up the bulk of our first-time homebuyers, the path to property ownership has been a challenging one,\u201d said Phil Soper, chief executive at Royal LePage, the real estate firm that developed the study. \u201cIn our largest cities, it is difficult for young people to purchase a home on a single household income.\u201d<\/p>\n<div class=\"pmYTPlayerContainer video-container\">\n<div id=\"pn_video_407886\"><\/div>\n<\/div>\n<p><script type=\"text\/javascript\">( function() { pnLoadVideo( \"videos\", \"d6_oASYXEHw\", \"pn_video_407886\", \"\", \"\", [] ); } )();<\/script><br \/>\nCiting Statistics Canada data, the study found that \u201cpeak millennial\u201d homebuyers \u2014 those between the ages of 24 and 31 \u2014 had a median annual salary of $38,148 after heating and property tax costs of $185 per month. Prior to the introduction of mortgage stress testing, buyers in this group who qualified for a 3.09 per cent mortgage rate could afford a maximum homebuying budget of $243,349, including a 20 per cent down payment.<\/p>\n<p>The new rules introduced by the Office of Superintendent of Financial Institutions require homebuyers to prove that they can pay their uninsured mortgage at the negotiated rate plus two percentage points or at the five-year benchmark rate published by the Bank of Canada\u2013 currently 5.14 per cent.<\/p>\n<div id=\"attachment_1581174\" style=\"width: 650px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg\"><img decoding=\"async\" loading=\"lazy\" data-attachment-id=\"1581174\" data-permalink=\"http:\/\/business.financialpost.com\/real-estate\/mortgages\/mortgage-stress-tests-have-squeezed-millennials-homebuying-budgets-by-40000-study\/attachment\/0425later\/\" data-orig-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg\" data-orig-size=\"1000,750\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"0425later\" data-image-description=\"&lt;p&gt;Some millennials are sitting on the sidelines longer after mortgage stress tests dented their purchasing power.&lt;\/p&gt;\n\" data-medium-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=300\" data-large-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=640\" class=\"size-large wp-image-1581174\" src=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=640&#038;h=480\" alt=\"\" width=\"640\" height=\"480\" srcset=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=640&amp;h=480 640w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=150&amp;h=113 150w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=300&amp;h=225 300w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg?w=768&amp;h=576 768w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/0425later.jpg 1000w\" sizes=\"(max-width: 640px) 100vw, 640px\"><\/a><\/p>\n<p class=\"wp-caption-text\">Some millennials are sitting on the sidelines longer after mortgage stress tests dented their purchasing power.<\/p>\n<\/div>\n<p>Under these rules, the average millennial homebuying budget fell to $203,246 under a 5.14 per cent mortgage rate, a drop of $40,103 or 16.5 per cent, according to the study.<\/p>\n<p>\u201cThat might buy something elsewhere in Canada but it makes Vancouver and Toronto basically completely unaffordable,\u201d said Tom Storey, a realtor with Royal LePage who deals primarily with first time homebuyers. \u201cAnd for an average couple it won\u2019t buy much. They\u2019ll probably have to go into the suburbs.\u201d<\/p>\n<ul class=\"related_links\">\n<li><a href=\"http:\/\/business.financialpost.com\/personal-finance\/mortgages-real-estate\/millennials-behind-surge-in-home-buying-intentions-with-a-little-help-from-family-poll\">Millennials behind surge in home buying intentions (with a little help from family): poll<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/real-estate\/millennials-are-staying-put-in-parents-inn-for-now-but-the-desire-to-own-a-home-remains-strong\">Millennials\u2019 prolonged stay at Parents Inn is having a profound impact on housing markets<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/personal-finance\/young-money\/most-millennials-seen-worse-off-than-parents-despite-aptitude-study\">The millennial disadvantage is real: Most millennials are worse off financially than parents<\/a><\/li>\n<\/ul>\n<p>When their two incomes are combined, an average millennial couple sees their maximum purchase price increase to $406, 479 \u2014 down from $486,674 prior to the stress testing. But the wide disparity in home prices across the country means that what their budget will secure at one end of the country is far different from what it will buy at the other.<\/p>\n<p>For instance, millennial couples working with a budget of $325,000 to $425,000 could buy 1,736 square feet of space in Halifax compared to just 788 square feet in the Greater Vancouver Area, the study states.<\/p>\n<p>While Storey acknowledged that income levels also range between Canada\u2019s major cities, his own experience is that most young buyers are turning to family for financial support.<\/p>\n<p>\u201cAbout 75 per cent of my clients have backing from their parents,\u201d Storey said. \u201cSome get a little help, some get the whole down payment. It\u2019s definitely the norm.\u201d<\/p>\n<p><em>\u2022 Email: <a href=\"mailto:npowell@nationalpost.com\">npowell@nationalpost.com<\/a> | Twitter: <a href=\"https:\/\/twitter.com\/naomi_powell\" class=\"twitter-follow-button\">naomi_powell<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8216;In our largest cities, it is difficult for young people to purchase a home on a single household income&#8217; says new study<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7337"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=7337"}],"version-history":[{"count":3,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7337\/revisions"}],"predecessor-version":[{"id":7351,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/7337\/revisions\/7351"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=7337"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=7337"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=7337"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}