The federal government has announced changes to make it easier for first-time home buyers to enter the housing market. Finance Minister Chrystia Freeland unveiled the changes which include an increase in withdrawal limits under the Home Buyers’ Plan, allowing Canadians to take out up to $60,000 from their RRSP for a first home purchase. Additionally, the government is extending the repayment period for this amount from two years to five years for withdrawals made between 2022 and 2025. Amortizations on some mortgages will also be extended to 30 years to make monthly payments more affordable for first-time buyers.
The goal of these changes is to address the shortage of housing options and high rents and home prices that have made homeownership seem like an unattainable dream for many young Canadians. By increasing the withdrawal limits under the Home Buyers’ Plan and allowing for longer amortization periods on mortgages, the government aims to reduce the burden of carrying a mortgage for first-time home buyers. While stretching out amortizations to 30 years will lower monthly payments, it could lead to an increase in the overall amount of interest paid over the lifetime of the mortgage.
Freeland also highlighted the popularity of the first home savings accounts (FHSA), with over 750,000 accounts opened across Canada since its introduction. Similar to the Home Buyers’ Plan, the FHSA allows Canadians to set aside up to $40,000 tax-free for a home down payment, with no requirement to repay the amount. These measures come at a time when a CIBC poll shows that 76 per cent of non-homeowners feel that buying their first property is out of reach. The government has been promoting these housing-focused initiatives as part of the upcoming federal budget.
These changes are part of a larger effort by the government to make homeownership more accessible to younger Canadians and address the challenges posed by the current housing market. By increasing the withdrawal limits under the Home Buyers’ Plan and extending repayment periods, the government hopes to make it easier for first-time buyers to save for a down payment and manage their mortgage payments. The extension of amortizations to 30 years is intended to make monthly payments more affordable, although it may result in higher overall interest payments over the life of the mortgage.
Overall, the changes announced by the government aim to make homeownership a reality for more Canadians, particularly younger individuals who may be struggling to enter the housing market. By providing more flexibility and support for first-time buyers, the government hopes to address the challenges of high rents and home prices and create a more inclusive housing market. These measures, alongside the popularity of the FHSA and the government’s ongoing efforts to promote housing-focused initiatives, demonstrate a commitment to making homeownership more accessible and affordable for all Canadians.
