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The Surprising Trend of Falling Mortgage Balances for Young Families
In Canada, homeownership continues to be a challenge for many, especially with the rising costs of housing and mortgage rates. Yet, a surprising trend has emerged: young families, specifically those with a primary earner under 35 years old, are seeing a decline in their average mortgage balances. Despite the overall increase in mortgage debt across other age groups, the mortgage balances for younger families have dropped by $17,000 since 2022. This shift is notable, as it defies the broader trend of rising debt in the housing market.
One of the main reasons for this reduction is the growing number of young people who are either delaying entering the housing market or opting for more affordable housing options. While the number of new households being formed in this age group has surged, many of these households are choosing to rent rather than buy. With homeownership increasingly out of reach, young families are prioritizing affordability, which results in fewer first-time homebuyers and, consequently, a reduction in average mortgage balances.
Another factor contributing to the decline in mortgage balances is the increasing equity that younger homeowners are building. Over the past couple of years, the value of real estate assets has risen, while the value of mortgages has decreased. This suggests that a growing number of young households are managing to pay off their homes entirely. As more younger families own their properties outright, the overall mortgage balance for this group continues to decline, reflecting higher equity positions and greater financial stability.
Additionally, a rise in prepayments has also played a role in reducing mortgage balances. Faced with higher borrowing costs, many younger homeowners are focusing on paying down their mortgages faster. However, the ability to make these prepayments raises questions about how young families are funding them. For many, financial support from older relatives may be playing a key role. This support, often in the form of gifted down payments, is helping young families qualify for mortgages and reduce their debt obligations, making homeownership more accessible despite the high cost of borrowing.