Genworth's statistics on 1,800 first-time homebuyers
With 35-50% of home sales attributed to first-time buyers (depending on the year and survey), it’s vital for mortgage marketers and industry watchdogs to understand the traits and risks of this demographic. That includes understanding how well prepared young Canadians are to buy a home, and to handle rate hikes, price corrections and unemployment.
Genworth and Environics polled some 1,800 first-time homebuyers recently to get a handle on these questions. We delved through their report to pull out the meatiest data. Here are six findings of note about first-time buyers:
1) Homebuyers are paying more than ever
The median price paid by a first-timer is now $293,000 nationwide, with Vancouver leading the charge at $420,000. The median down payment is now sitting at 12%, an average $34,000. Countless young borrowers wouldn't have a hope of home ownership were it not for a gifted down payment or loan to bolster their down payment.
2) Big lump-sum prepayment privileges often go to waste
Just ONE in four first-timers made a lump-sum prepayment in the past year. Many buyers ask for higher pre-payment privileges, often accepting a higher rate in order to obtain these privileges, but fail to ever take advantage of them.
3) It often takes two
62% of first-time buyers purchased with a spouse/partner. This allows them to purchase a bigger home, and absorb rate hikes easier, due to the combined annual income of both parties.
4) They're going to have kids
59% of first-timers are planning for children in the next five years, with another 17% not being sure. This implies the potential to up-size their property. Half of first-timers refer to their first home as a "starter home". This heightens the importance of ensuring clients are obtaining a mortgage with good refinancing terms or a fair penalty calculation, as the potential to increase their mortgage amount or break out of their contract early is ever present.
5) Debt ratios are mostly conservative
The average Genworth-insured borrower has a 35% total debt service ratio (TDS). Genworth warns that getting up to 40%+ TDS is "high". About only 8% of Genworth's portfolio is at the 42%+ range.