1st-time homebuyers get more family help for down payment

The bank of Mom and Dad is playing a larger role in helping Canada's first-time homebuyers put together a down payment.

That’s one of the findings of a survey of the residential mortgage market that was done for the Canadian Association of Accredited Mortgage Professionals (CAAMP).

The group conducts an annual survey of homeowners and prospective homeowners across the country. This year, 2,000 people answered an online survey by Bond Brand Loyalty in October 2014.

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CAAMP has found the average down payment made on a first home is unchanged over the last 35 years, at about 21 per cent.

But the number of respondents who said they relied on a gift from their parents jumped from 2010 to 2014, as home prices rose steeply in most urban areas.

“Because we’ve seen an increase in overall housing prices, our parents’ and grandparents’ generation do have more equity in their properties," said CAAMP chief executive Jim Murphy in an interview with CBC's The Exchange with Amanda Lang. "Most of them have paid off their mortgages and are able to transfer some of that wealth."

During the four-year period, first-time buyers said 11 per cent of their down payment was a gift from family and six per cent was a loan.

Not driving the market

That’s up sharply from those who bought in 2000 to 2004 who said six per cent of the down payment was a gift from parents and six per cent was a loan. The survey indicates some parents have always helped with putting together a down payment, but the amount given as a gift has risen.

CAAMP doesn’t believe the increase in parental support is driving home prices higher.

“Even at this relatively elevated share, we cannot say that this source of funds has become an important driver of the market,” the report said.

In fact, a third of 18- to 35-year-olds who had not bought a home said they were waiting for prices to fall and their personal savings to increase before buying.

Personal savings remain the largest portion of down payments on a house, at 40 per cent.

The CAAMP study also points to the ability of homeowners to pay down their mortgages in the current low-rate environment.

Equity is rising

Even among respondents who had bought in the last four years, 69 per cent of mortgage holders had 25 per cent or more equity in their homes. That would give them room to manoeuvre if rates rise or they need to renegotiate.

There was also a pattern of Canadians accelerating their payments to reduce the amortization period, CAAMP said. Respondents had average equity of 74 per cent in their houses, and 36 per cent reported they had paid off the mortgage in full.

For every $1,000 in the value of Canadian homes, about $260 is owed on a mortgage, CAAMP said.