June 06, 2022
Real Estate News
RYPM
The rules of the First-Time Home Buyer Incentive have been
re-written.
For those in the dark, the First-Time Home Buyer Incentive (FTHBI) is designed
to help people across Canada purchase their first home (in theory, at least).
The program offers 5% or 10% of the home’s purchase price to put toward a down
payment in an interest-free loan. This addition to a down payment lowers
mortgage carrying costs, making homeownership more affordable, thanks to lower
monthly mortgages. The government takes an equivalent stake in the home, paid
back upon the home’s eventual sale or within 25 years.
This week, the Canada Mortgage and Housing Corp (CMHC) altered the rules of the
FTHBI, placing caps of 8% per year on both the upside and downside returns it
would receive on its share in homes participating in the
program. According to CMHC, the calculation is retroactive to the
program’s implementation date.
The program was first implemented in September 2019, when it
was announced in the federal budget. And it hasn’t exactly been a
celebrated success in the years since. Many said the initiative barely helped Canadians who live in big cities. Given
the program’s price limits, it is virtually useless in cities with sky-high
home prices, like Toronto and Vancouver.
The altered rules come in a climate of climbing interest
rates, a cooling in the demand for mortgages, and a slight drop in home
prices. According to CMHC, the updated rules will benefit more
homeowners. “The Government of Canada will limit its share in the appreciation
of a home!,” reads the update on its website. “Now, homeowners will pay back up
to a maximum gain of 8% per annum (not compounded) on the Incentive amount from
the date of advance to the time of repayment.”
Not everyone is as thrilled with the update, however. The
move was met with criticism on social media by some of the most influential
voices on Canada’s real estate scene.
“So, at the first sign that home prices are trending down CMHC needs to revise
their co-buying program to cap their losses,” John Pasalis of Realosophy tweeted. “Which clearly means our federal housing regulator
launched this program without even considering the possibility that home prices
might fall in the future.” Rob Mclister, a public figure in the mortgage world,
was also quick to chime in — and so were his followers.
While some may feel that the government is hastily trying to
protect its losses, other Twitter users were quick to point out that the CMHC
is also capping appreciation. Nonetheless, the social media sentiment toward
the program isn’t exactly positive.
“So basically they made a crappy program even crappier,” tweeted one user.
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