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The federal government has discontinued the First-Time Home Buyer Incentive, a much-criticized program aimed at improving housing affordability for new buyers that saw muted uptake in major markets.

Canada Mortgage and Housing Corporation (CMHC), the national housing agency, said in a statement on its website that the program was winding up, with no new or updated submissions to be accepted after midnight ET on March 21.

Applications resubmitted after that date will be subject to a manual review, with review requests to be submitted no later than midnight ET on March 25 and no new approvals to be granted after March 31.

Introduced in 2019, the Incentive was aimed at reducing monthly mortgage payments for qualified first-time buyers through a shared-equity scheme. It offered a contribution of 5% or 10% towards the purchase of a newly constructed home, and 5% of the purchase of a resale existing home or new/resale mobile or manufactured home.

Still, that shared-equity component, which meant the government would also benefit from the potential future sale of a home, proved unpopular with buyers, who would have to repay the Incentive either after 25 years or upon sale.

The program faced challenges from the off. In 2020, federal Conservative MPs Tom Kmiec and Stphanie Kusie slammed its cost and low levels of consumer interest, urging CMHC to topdeo the scheme,  after an annual report showed its uptake lagged far below projections.

Mortgage Professionals Canada (MPC) also criticized the Incentive at its 2022 summit, when vice chair Veronica Love said the scheme was “simply failing” with data showing participation in the program was less than a third of what the government had originally envisaged.

Between its launch in September 2019 and the end of March 2021, the program had seen  LESS THAN 10,000 sucessfull applicants across Canada with Edmonton and Calgary accounting for nearly 2,000 of that total.


RRSP Home Buyers Plan
 April 24 2024     Posted by John C Filice

In 2024, the Canadian government made significant changes to the Registered Retirement Savings Plan (RRSP) Home Buyers' Plan (HBP), aiming to make homeownership more accessible, particularly for first-time buyers. These adjustments address the rising housing prices and the challenges younger Canadians face in entering the housing market.

The HBP now allows first-time homebuyers to withdraw up to $60,000 from their RRSPs, an increase from the previous $35,000 limit. This enhanced limit, effective April 16, 2024, provides a substantial boost to potential homeowners, enabling them to gather a larger down payment more quickly. The money withdrawn under this plan is tax-free as long as it is repaid within a 15-year period, with repayments not required to start until five years after the withdrawal if the withdrawal is made between 2022 and 2025. This grace period extension is particularly beneficial as it allows new homeowners to stabilize financially before beginning the repayment process.

In addition to these changes, the Canadian government is also taking measures to support the construction of new homes and improve mortgage conditions. As of August 1, 2024, first-time buyers purchasing newly built homes will have access to 30-year mortgage amortizations. This extension from the traditional 25-year amortization is designed to make people's monthly mortgage payments much more affordable, thereby supporting entry into the housing market.

The enhancements to the HBP and mortgage terms are part of a broader strategy by the government to address the housing affordability crisis in Canada. These measures are intended to provide more young Canadians with the opportunity to own their first home and to stimulate new housing supply, which is critical given the escalating home prices and high rents.

For anyone considering utilizing the RRSP Home Buyers' Plan, it is crucial to understand the specific requirements and terms associated with these withdrawals. In order to help guarantee success and attain the most benefits, having certain elements in place is absolutely essential.

Overall, these initiatives reflect a strong push by the Canadian Government to help support first-time homeowners in Canada, making it a bit easier for younger generations to purchase their own homes and invest in their futures amid challenging economic conditions.

If you have any questions on this topic, please reach out and contact us and we'd be more than happy to assist you.

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