Time to revise expectations and tone down the spending

Hey there, time traveller!
This article was published 07/06/2025 (294 days ago), so information in it may no longer be current.

A few weeks ago, the Canada Mortgage and Housing Corporation released the results of its 25th annual “mortgage consumer survey.” Earlier this year, the corporation spoke to almost 4,000 individuals across the country, including first-time homebuyers, repeat buyers, mortgage renewers and refinancers. The objective of the survey was “to explore their behaviours, attitudes and expectations regarding homeownership and the process of obtaining a mortgage.” The results are both fascinating and concerning.

For first-time homebuyers, 64 per cent rented their housing for an average of 6.3 years before finally purchasing their first home. More than half of first-time buyers (54 per cent) shared their home purchase with someone other than their partner or spouse. That likely points to the growing role that many parents, relatives and other trusted individuals currently play in helping first-time purchasers get into the increasingly-expensive housing market.

The survey also found that a staggering 65 per cent of first-time buyers paid the maximum they could afford. That explains in part why so many Canadians are vulnerable to interest rate increases and experiencing severe affordability issues. I have seen countless instances over the years in which people purchase homes they can barely afford, leaving no money to pay for furniture, insurance, land transfer taxes and/or legal fees. And what happens if the borrower gets sick or loses his job?

It also explains why parents and other relatives feel increasingly pressured to help first-time buyers by contributing money toward the purchase price.

As to their attitude toward home ownership, 79 per cent of first-time buyers said that “homeownership is a good long-term financial investment,” while almost as many (71 per cent) “believe the value of their home will increase in the next 12 months.”

Those are dangerous assumptions. As additional housing becomes available, the growing supply could cause home prices to go down, not up. Similarly, an economic downturn, which is widely expected in Canada due to the Trump tariffs, could also cause home prices to either decline or stagnate. The same could happen if interest rates increase.

For repeat buyers (those not buying their first home), the responses to the survey were similar. Four out of 10 purchasers paid the maximum they could afford, while the average time needed to save for a down payment was 2.7 years.

The CMHC report says that financial gifts, averaging $103,382, also assisted some repeat buyers. That said, 67 per cent of respondents said they would have still bought their home without the gift, with some concessions.

Eight out of 10 repeat purchasers believe that homeownership is a good long-term financial investment, while almost seven out of 10 believe the value of their home will increase in the next 12 months. Again, for the same reasons set out above, that’s a risky assumption for those homebuyers to be making in such an uncertain economy and housing market.

While 39 per cent of repeat buyers have renovated in the past three years, 68 per cent plan to renovate within the next five years. The majority of those renovations were intended to customize the home to meet the owners’ needs and preferences, but almost half of renovations were for the purpose of increasing the home’s value.

If any of those stats cause you to be concerned, they should. That’s because Canadian consumer debt reached a historic high of $2.56 trillion at the end of 2024, a 4.6 per cent increase from 2023.

The average non-mortgage debt per consumer reached $21,931, which is higher than pre-pandemic levels.

Beyond that, Statistics Canada reported in February that Canada has the highest level of household debt to disposable income among G7 countries — more than 180 per cent — compared to approximately 100 per cent in the United States and Germany.

MNP reported in January that two in five Canadians are worried someone in their household could lose their job (an all-time high), while just half of Canadians are $200 or less away from insolvency.

The pace of savings has continued to accelerate for high-income Canadian households, but lower-income homeowners continue to spend more than they earn in order to withstand affordability pressures.

How do you reconcile those troubling statistics with the reality that many Canadians are still piling on personal debt and spending as much as they can afford on home purchases — based in part on the reckless belief that their homes will quickly increase in value?

A frequent complaint among older Canadians is that younger Canadians want everything too soon — a bigger house, a newer car, international vacations — even if it means going deeply into debt.

The latest stats may support that perception, but they may also apply to older generations of Canadians.

With all of the post-pandemic economic turmoil we have experienced, including higher prices and interest rates, along with the job losses and uncertainty caused by the Trump tariffs, now is not the time to be taking huge risks with your personal finances.

If there was ever a time to tone down expectations and be more careful with your spending, now is that time.