First-time homebuyers have returned to the market—with a little help from their parents

First-time homebuyers living in this city depend more on their parents to cover their mortgages and interest payments than ever before, according to a new Bank of Canada report. It found that the percentage of Torontonians who co-signed with a parent is 13.8 per cent, up from 4.1 per cent in 2004.

This new trend of co-signing with a parent has allowed house hunters to buy more expensive homes than they would have been able to otherwise. The report says that parental support increased individual purchasing power by about 72 per cent, raising the maximum price the average first-time buyer can afford from $458,000 to $787,000.

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Looking back to the end of 2022 for comparison, the Bank of Canada says that average purchase price across the country was $709,000 while the average purchase price for first-time homebuyers without a parental co-sign was $628,000.

The report goes on to warn that co-signing with a parent, especially in a market as expensive and volatile as Toronto’s, risks opening the door to larger financial problems. Salaries, for example, have not kept up with rising prices, and roughly one-third of parents who co-sign with their children also have mortgage payments of their own.

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Parents who co-sign on mortgages beyond their means, the Bank of Canada continues, are also responsible for the largest average increase in delinquency rates on credit products. “Co‑signing can leave both parents and children more vulnerable to a sharp deterioration in either party’s financial situation,” reads the report.