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CMHC to scrap First-Time Home Buyer Incentive and refocus funding on other tools
3/2/2024 | Posted in Home Buyers by Paul DeAdder | Back to Main Blog Page
The federal government has announced it will be discontinuing its First-Time Home Buyer Incentive (FTHBI) program as of March 21.
Introduced in 2019, the shared-equity program is administered by the Canada Mortgage and Housing Corporation (CMHC) and involves a government contribution of 5% to 10% towards the down payment for first-time homebuyers in exchange for a proportional share in the future increase or decrease in the home’s value.
Buyers aren’t required to make any monthly payments, but the loan has to be repaid—at current fair market valuation determined by CMHC using an independent appraisal—either after 25 years or upon the sale of the property.
Since its inception, the program has faced criticism and struggled with a participation rate far below initial government estimates.
When it was unveiled, the government earmarked $1.25 billion over three years with the goal of assisting 100,000 homebuyers to purchase homes. As of March 2022, CMHC received less than 16,000 applications worth about $285 million in shared equity mortgages.
Critics argued that the maximum purchase price of $505,000 permitted under the program wouldn’t do much to assist first-time buyers in the country’s largest markets where prices are significantly higher.
Five months into the program, CMHC responded by raising the maximum purchase price permitted under the FTHBI to about $722,000 for buyers in Toronto, Vancouver and Victoria.
CMHC said the program was initially expected to sunset by 2022, but was extended in that year’s budget to December 31, 2025.
“After a review of federal housing plans in light of the current housing situation, the federal government decided that the First Home Savings Account (FHSA) is a better tool to help first time homebuyers buy a home,” a spokesperson with CMHC told CMT.
It added that over 500,000 Canadians have already opened the new registered savings account—which is designed to help first-time buyers save for a home—since it was launched early last year.
“Refocusing this funding will also allow the government to focus on other impactful policy areas,” CMHC said, adding that the decision to discontinue the program will not impact homebuyers who were already approved.
Source: Canadian Mortgage Trends
