If your client is shopping for a home or has homeownership as a goal, they might be worrying about the mortgage process.
An Ipsos survey conducted for Zillow, an online real-estate database company based in Seattle, Wash., found that more than half of respondents (56%) said qualifying for a mortgage was a barrier to homeownership. And more than half (54%) said mortgage payments were a barrier.
Advisors can effectively address those concerns by helping clients reach their savings goals and sticking with a cash-flow plan.
About half of survey respondents (51%) also said they’re concerned that stricter stress test rules will prevent them from qualifying for a mortgage, up five points since 2018. For younger survey respondents aged 18 to 34, that figure was 69%.
As of 2018, mortgage borrowers with more than a 20% down payment (uninsured mortgages) must prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s five-year benchmark rate (currently 5.19%).
Before 2018, an existing stress test already required that uninsured mortgages qualify at the central bank’s rate.
While the effects of 2018 changes to the stress test have given rise to some debate, advisors can explain to clients that meeting the stress test can help them sleep sounder over the longer term, because it indicates they’d still be able to make mortgage payments if faced with a higher interest rate or less income.
About the survey: Between Sept. 24 and Oct. 8, 2019, a sample of 1,503 Canadians aged 18 and over was interviewed online via the Ipsos I-Say panel. Quota sampling and weighting were used to balance demographics to ensure that the sample’s composition reflected the adult population according to Census data and to provide results intended to approximate the sample universe.