Get money-saving tips in your inbox.

Stay on top of personal finance tips from our money experts!

News & Resources

First-Time Buyers Can’t Save Down Payments Fast Enough to Keep Pace with House Prices

April 13, 2021
6 mins
A man uses a pencil to point to a section of a document a young woman is holding

Here’s something that will surprise very few. Canada’s parabolic rise in home values is killing the dream of homeownership for young Canadians.

The numbers say it all.

More than a third of non-homeowners under the age of 40 — 36% to be exact — claim they’ve given up on ever owning a home. That’s the key finding of a new RBC survey, which illustrates the struggle young non-owners face.

As young people diligently try to sock away down payment funds, home prices just keep rising — for some, right out of their reach.

What’s more, well over half of Canadians (61%) expect prices to continue climbing.

By February, average home prices in Canada had jumped a whopping $135,607, or 25% year-over-year (Source: Canadian Real Estate Association).

That means average prices are rising more than $10,000 a month.

Meanwhile, the 60% of non-homeowners who are likely to purchase in the next two years say they’re putting aside “just” $789 a month towards a future down payment.

To state the obvious, that’s a problem — especially given a recent Scotiabank survey confirmed that:

  • personal savings is the #1 way Canadians plan to finance their down payment (49% of Canadians)
  • #2 was using equity from their primary home (33%)
  • #3 was taking money out of investments, e.g., an RRSP or TFSA (33%; which partially overlaps with #1).

Calculating the rising mortgage hurdle

Here’s another view of how skyrocketing home price growth has hit mortgage affordability:

February 2020

  • Average home price: $542,484
  • Minimum insured down payment (5.3%): $29,248
  • Monthly mortgage payment at 1.79%: $2,122

February 2021

  • Average home price: $678,091 (+$135,607)
  • Minimum insured down payment (6.3%): $42,809 (+$13,561)
  • Monthly mortgage payment at 1.79%: $2,626 (+$504 per month)

*Interest rates used are the current lowest widely available insured mortgage rates quoted on RATESDOTCA. Assumes a 25-year amortization.

In other words, your typical prospective homeowner who saves $9,468 a year is not saving nearly enough to keep pace with rising down payment minimums.

What’s more, those surging home prices will cost buyers over $32,000 more interest over the life of their loan, assuming rates stay the same.

Today's Featured RatesUpdated 13:12 ET on Jul 23, 2024

Rates are based on a home value of $400,000

card image
3 Yr Variable
Loan to value
80.01% to 95%
Rate held until
Oct 23
card image
5 Yr Fixed
Loan to value
80.01% to 95%
Rate held until
Nov 22
card image
5 Yr Variable
Loan to value
80.01% to 95%
Rate held until
Nov 22

Higher mortgage hurdle for home prices above $500k

Compounding the down payment struggle is a 2015 Department of Finance rule change. That change required that borrowers put down 10% of the purchase price that is over the half-million-dollar mark. Prior to that, the minimum down payment applied to the entire purchase price up to $1 million.

Now that average home prices have crossed this $500,00 threshold, a growing percentage of buyers are having to come up with meaningfully larger down payments. To date, regulators have refused to index either that $500,000 level or the $1 million ceiling (above which 20% down is required on the entire purchase price) with home price inflation.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

Latest life insurance articles

10 Life insurance myths debunked
Life insurance is for someone older or has kids, right? Wrong. Let’s debunk life insurance myths and learn why everyone needs some form of coverage.
6 mins read
Do you need life insurance? A primer for Canadians
Life insurance isn’t a one-size-fits all solution. But if you have dependents, it can be an important financial safety net for those you love.
7 mins read
Why life insurance should be part of estate planning for new parents
Life insurance is one of the best ways new parents can protect their family and help loved ones in the event of your unexpected death.
5 mins read

Subscribe to our newsletter

Stay on top of our latest offers, relevant news and tips!

Thanks for joining!

You'll be hearing from us shortly - stay tuned.