Important advice for the growing ranks of first-time buyers

Stepping onto the Canadian property ladder can feel like joining a poker game where everyone has a royal flush. Photo by Getty Images/iStockphotoArticle contentThese days, stepping onto the Canadian property ladder as a first-timer can feel like joining a poker game where everyone else has a royal flush and you’ve got a 2-7 offsuit.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentAverage prices are no less than 52 per cent higher versus ten years ago.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentAnd that would be grand if we were all making lots more money in 2025 than in 2015, but average Canadians are really not.Article contentArticle contentAdjusted for inflation, per capita disposable incomes aren’t even one per cent higher in that time span, according to projections from IBISWorld.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentSure, first-time buyers (FTBs) earn more than the “per capita” income and buy cheaper homes than average, but the overall point still holds. It’s far harder for young people to own their own roofs today than it was in 2015. (In the interest of staying non-partisan, I will very carefully avoid naming the Prime Minister who took over for a decade, starting in 2015.)Article contentIn any event, deteriorating housing economics are partly why average Canadians must live nearly half their expected lives (40 out of 82 years) before they become first-time buyers.Article contentAgainst all oddsArticle contentSuddenly, entry-level buyers are coming out of the woodwork.Article contentAccording to Equifax Canada, mortgage volumes for first-time buyers surged 20 per cent in the 12 months ending September 30.Article contentPart of that is thanks to recently improved affordability. That is, the nominal cost of carrying a mortgage, relative to incomes, has improved by roughly 23 per cent since real estate fever peaked in 2022. Falling home values, lower rates, slightly higher nominal incomes and longer amortizations have helped drive that improvement.Article contentArticle contentOn top of this, we now have slower population growth and more supply (supposedly) coming online. So if you’re a young person, don’t give up hope on homebuying just yet.Article contentRead More The best mortgage rates in Canada right now The best reverse mortgage rates in Canada right now Article contentA few quick pointersArticle contentIn plenty of cities, the math tilts toward renting, but if you’ve decided to join the ranks of property-tax payers anyhow, you have some serious mortgage decisions to make.Article contentFor those signing mortgage documents for the first time, here’s what I’d say:Article contentPlease don’t over-leverage if there’s any chance you’ll need to sell or move in the next five years. Given default insurance fees, those who make the minimum five-per-cent down payment are left with only one per cent equity on the day they take their keys. A stiff breeze would be all it takes to drive prices down one per cent. That matters because owing more than your house is worth turns that dream home into a financial ankle monitor you can’t afford to cut off. And when real estate optimists like Royal LePage publicly admit that prices could dip 4.5 per cent in places like Greater Toronto, folks outside of strong markets need to take price risk seriously.Don’t be lured by cheaper variable rates just to save some interest up front. Right now, default insured buyers can find variable mortgage rates down around 3.45 per cent across the country, which is the sort of number that makes people suddenly very brave. By comparison, five-year fixed rates are nationally available as low as 3.84 per cent. While shaving nearly 40 basis points off the sticker rate is tempting, forward pricing in the bond market (which is fallible but objective) implies a $4,300 five-year savings by going fixed, versus going variable. That’s based on the average first-timer’s mortgage amount, which is $438,000 according to Equifax Canada.Protect your future self by building in payment flexibility. More than half of insured borrowers are taking 30-year amortizations, which just became available last year. Even if you don’t need one to qualify, having lower required payments gives you valuable cash-flow flexibility in emergencies, or when you want to do something sensible, like fund your RRSP. You can always make extra prepayments later to smash down the effective amortization on your mortgage.Trending Canadian households boost their wealth to another record high of $18.4 trillion with ‘supercharged' financial asset growth Wealth CRA penalized taxpayer for repeated failure to report income Personal Finance This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth Mortgagors continue to roll the dice with variables Mortgage Rates 'Wild West out there': Cargo theft reports soar in Canada, but that's just the tip of the iceberg News Article contentThe road to ownership is still long and full of potholes, but for the first time in years, it’s pointing in the right direction. Just ensure you manage your rate risk because the forecast ahead calls for heavy uncertainty.Article contentRobert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.Article contentLooking to save on your mortgage?Article contentFor the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here.Article contentShare this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Canadian households boost their wealth to another record high of $18.4 trillion with ‘supercharged' financial asset growth Wealth CRA penalized taxpayer for repeated failure to report income Personal Finance This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth Mortgagors continue to roll the dice with variables Mortgage Rates 'Wild West out there': Cargo theft reports soar in Canada, but that's just the tip of the iceberg News