Why enticements for first-time buyers are failing
An early promise of the federal government’s First-Time Home Buyers Incentive was the prospect of homeownership for a greater number of Canadians – a promise that turned out to be a broken one, by most accounts.
In its recent summit, Mortgage Professionals Canada said that the equity-mortgage program was “simply failing.”
“Most recent data shows that the First-Time Home Buyer Incentive program participation is less than one-third of the government’s stated initial goal,” said Veronica Love, vice chair of MPC. “Almost all clients dislike the idea of becoming a co-homeowner with the government, if they can avoid it. An insurable 30-year amortization can accomplish at least the same outcome as the first-time home buyer program promotes: reduced monthly payments for buyers, but without the complexity of two mortgages and increased legal costs to buy and sell the home.”
The offering, which began in September 2019, is intended to fund 5% of the down payment for a first-time buyer’s purchase of an existing home, or 10% for a newly built residence..
Mounting home prices continue to make would-be homeowners hesitate, with a recent poll by Royal Bank of Canada indicating that purchase intentions over the next five years have dropped to just 23%.
“While there is still a significant amount of activity in the market, our research indicates that the rush of Canadians looking to purchase a home over the last two years has subsided and we’re now starting to see a move back to pre-pandemic levels,” said Andrea Metrick, senior director of home equity financing, acquisition, and distribution at RBC. “Between rising costs and the competitiveness of the market, Canadians may now be taking a step back and setting aside more time to plan and save before making the jump into homeownership.”
Sam Ansari, Mortgage Broker, Centum Liberty Mortgages Corp., 7191 Yonge Street, Suite 505, Thornhill ON L3T0C4.