Mom and Dad to the Rescue

Matt Chan • Sep 18, 2017

With housing affordability declining across Canada, one trend is on the rise: parents are increasingly helping their adult children when it comes to housing.

That assistance is coming in the form of cash gifts/loans for today’s growing down payments, and also from parents providing shelter to their adult children under their own roof.

New data released from the 2016 census shows that more than one-third (34.7%) of young adults aged 20 to 34 are now living with their parents, having either left at some point and returned, or never left at all.

That number has been increasing steadily since 2001 when 30.6% of young adults were living with at least one parent.

Among those aged 30-34, the percentage co-residing with a parent rose from 11.2% in 2011 to 13.5% in 2016.

Unsurprisingly, areas that have seen rapid home price increases report higher instances of young adults living at home.

Ontario saw the highest percentage of all the provinces, with 42.1% of those aged 20-34 living at home—up from 35% in 2001. That means more than two in five young adults in the province now live with their parents.

And of the 35 census metropolitan areas, Toronto and Oshawa reported nearly half (47.4% and 47.2%, respectively) of young adults living at home.

While it may be tempting to link this increase strictly to rising home prices, the census offers no concrete explanation.

In an interview with Global News, senior Statistics Canada analyst Jonathan Chagnon said it can be due to a combination of factors. “…for British Columbia and Ontario, these are regions where we see a lot of immigrants, so that could be part of cultural differences,” he told Global. “(But) these are also regions where the price of housing is really high.”

The “Bank of Mom and Dad”

For those who aren’t providing shelter, many parents are contributing financially towards the down payments of their children.

A recent CIBC poll indicated that a full 76% of parents would offer financial support to help their child move out, marry or live with a partner. And despite a significant percentage of adult children currently living at home, a majority of parents (65%) said they would prefer to give a financial gift rather than have their child and spouse/partner live with them.

The poll found that the national average gift size was $24,125. For those with household incomes over $100,000, that figure nearly doubled to $40,558, with as many as 25% giving their kids more than $50,000.

In Mortgage Professionals Canada’s annual fall survey , author Will Dunning noted that down payment assistance for first-time buyers from their parents has trended above its historical average in recent years.

For many years, “funds from parents and other family members (in the form of loans and gifts) have been a small part of down payments, averaging 14% for all first-time buyers,” he wrote. “This share was stable until recently, rising to 18% for recent buyers (2014 to 2016).”

However, he cautioned against drawing the conclusion that this source of funds from the “Bank of Mom and Dad” has become an important driver of home-buying.

“The suggestion is that, in a more expensive housing market, parents are increasingly helping their children with down payments, via gifts and loans: the children need larger down payments; because the value of the parental home has increased rapidly during the past decade and a half, the parents are in a better position to assist the children,” he noted. “The data indicates that there is truth to the suggestion that parents are providing more help, but it also shows that this help is less significant than may be imagined (in terms of driving house sales).”

Additional Tidbits

Some other key findings from the census included:

From 2001 to 2016, when the share of young adults living at home increased, the share of young adults living with their own family decreased from 49.1% to 41.9%.
The proportion of young adults with other living arrangements (without their parents or their own family) also rose, from 20.3% in 2001 to 23.4% in 2016. These arrangements include living alone, with other relatives or with roommates.
More men than women aged 20 to 34 lived with their parents: five men for every four women, even though the proportion of young women living with their parents rose twice as quickly as that of men over the preceding 15 years.
How Canada compares to other countries in the proportion of young adults living at home:
- United States (ages 18 to 34): 34.1% in 2016
- Australia (ages 18 to 34): 30% in 2011
- European Union (ages 18 to 29): 48% in 2012

This article was written by Steve Huebl and was originally published on Canadian Mortgage Trends on Aug 9, 2017 under the title Sky-high House Prices? Parents to the Rescue!

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Purchase Plus Improvements

By Matthew Chan • 17 Apr, 2024

The best place to start the mortgage process is with a pre-approval. But once you’ve been pre-approved for a mortgage and you’ve been shopping with location in mind, what happens when you can’t find a suitable property? There's no doubt about it; finding the perfect property within your price range is a difficult task, especially for first-time homebuyers. So, before buyer’s fatigue sets in, maybe you should consider adding the cost of renovations into your purchase. Buying a property and including the cost of renovations into the mortgage is available through a program called purchase plus improvements. When purchasing a home, you can add the cost of home upgrades into your mortgage, making it a great option if you can’t find something move-in ready and aren’t afraid to do a little work! But while this sounds simple enough, in all honestly, it’s quite the process. There are some pretty strict rules to follow, but nothing that you can’t handle with the guidance of an independent mortgage professional. Here’s a quick overview of the process. Firstly, you must provide quotes to the lender ahead of time for the work you would like to complete. It’s good to note that the renovations will have to increase the value of the property accordingly. From there, the lender doesn’t give you the money to do the upgrades; you have to come up with that yourself. However, once the work has been completed and verified by an appraiser, the lender will reimburse you and include the money in your mortgage. This program isn’t for everyone. Buying a home is a stressful endeavour in and of itself. The added stress of having to undertake renovations right away might not be a good idea. But then again, if you have the financial wherewithal to handle the cost of renovations and like the idea of making it yours from the start, then this might be just the option you’ve been looking for! Please connect directly; it would be a pleasure to walk through the exact process and outline what securing a purchase plus improvements would look like for you!

Bank of Canada Rate Announcement Apr 10th, 2024

By Matthew Chan • 10 Apr, 2024

Bank of Canada maintains policy rate, continues quantitative tightening. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario April 10, 2024 The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening. The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually. The US economy has again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending. US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January. The euro area is projected to gradually recover from current weak growth. Global oil prices have moved up, averaging about $5 higher than assumed in the January Monetary Policy Report (MPR). Since January, bond yields have increased but, with narrower corporate credit spreads and sharply higher equity markets, overall financial conditions have eased. The Bank has revised up its forecast for global GDP growth to 2¾% in 2024 and about 3% in 2025 and 2026. Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025. In Canada, economic growth stalled in the second half of last year and the economy moved into excess supply. A broad range of indicators suggest that labour market conditions continue to ease. Employment has been growing more slowly than the working-age population and the unemployment rate has risen gradually, reaching 6.1% in March. There are some recent signs that wage pressures are moderating. Economic growth is forecast to pick up in 2024. This largely reflects both strong population growth and a recovery in spending by households. Residential investment is strengthening, responding to continued robust demand for housing. The contribution to growth from spending by governments has also increased. Business investment is projected to recover gradually after considerable weakness in the second half of last year. The Bank expects exports to continue to grow solidly through 2024. Overall, the Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026. CPI inflation slowed to 2.8% in February, with easing in price pressures becoming more broad-based across goods and services. However, shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs. Core measures of inflation, which had been running around 3½%, slowed to just over 3% in February, and 3-month annualized rates are suggesting downward momentum. The Bank expects CPI inflation to be close to 3% during the first half of this year, move below 2½% in the second half, and reach the 2% inflation target in 2025. Based on the outlook, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. While inflation is still too high and risks remain, CPI and core inflation have eased further in recent months. The Council will be looking for evidence that this downward momentum is sustained. Governing Council is particularly watching the evolution of core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians. Information note The next scheduled date for announcing the overnight rate target is June 5, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on July 24, 2024. Read the April 10th, 2024 Monetary Policy Report

How to Handle Missed Payments

By Matthew Chan • 03 Apr, 2024

If you’ve missed a payment on your credit card or line of credit and you’re wondering how to handle things and if this will impact your creditworthiness down the road, this article is for you. But before we get started, if you have an overdue balance on any of your credit cards at this exact moment, go, make the minimum payment right now. Seriously, log in to your internet banking and make the minimum payment. The rest can wait. Here’s the good news, if you’ve just missed a payment by a couple of days, you have nothing to worry about. Credit reporting agencies only record when you’ve been 30, 60, and 90 days late on a payment. So, if you got busy and missed your minimum payment due date but made the payment as soon as you realized your error, as long as you haven’t been over 30 days late, it shouldn’t show up as a blemish on your credit report. However, there’s nothing wrong with making sure. You can always call your credit card company and let them know what happened. Let them know that you missed the payment but that you paid it as soon as you could. Keeping in contact with them is the key. By giving them a quick call, if you have a history of timely payments, they might even go ahead and refund the interest that accumulated on the missed payment. You never know unless you ask! Now, if you’re having some cash flow issues, and you’ve been 30, 60, or 90 days late on payments, and you haven’t made the minimum payment, your creditworthiness has probably taken a hit. The best thing you can do is make all the minimum payments on your accounts as soon as possible. Getting up to date as quickly as possible will mitigate the damage to your credit score. The worst thing you can do is bury your head in the sand and ignore the problem, because it won’t go away. If you cannot make your payments, the best action plan is to contact your lender regularly until you can. They want to work with you! The last thing they want is radio silence on your end. If they haven’t heard from you after repeated missed payments, they might write off your balance as “bad debt” and assign it to a collection agency. Collections and bad debts look bad on your credit report. As far as qualifying for a mortgage goes, repeated missed payments will negatively impact your ability to get a mortgage. But once you’re back to making regular payments, the more time that goes by, the better your credit will get. It’s all about timing. Always try to be as current as possible with your payments. So If you plan to buy a property in the next couple of years, it’s never too early to work through your financing, especially if you’ve missed a payment or two in the last couple of years and you’re unsure of where you stand with your credit. Please connect directly; it would be a pleasure to walk through your mortgage application and credit report. Let’s look and see exactly where you stand and what steps you need to take to qualify for a mortgage.