Canada Housing Market

The Canada Mortgage and Housing Corporation (CMHC) has announced the termination of its first-time homebuyer incentive program, effective immediately. The final deadline for new or revised applications has been set for midnight Eastern Time on March 21.

Originally introduced to assist first-time homebuyers in reducing their monthly mortgage expenses, the program allowed the government to acquire a partial stake in properties. This was achieved through a government loan that could cover up to 10% of the home’s purchase price, thereby enabling a larger down payment and reduced monthly payments.

Participants were required to repay the incentive within 25 years or upon the sale of the property, with the repayment amount adjusting according to the property’s value fluctuation over time.

However, the program faced several challenges, notably regarding eligibility criteria. Restrictions were placed on household income and the mortgage amounts eligible under the program. Specifically, household incomes were capped at $120,000 nationally, with a higher threshold of $150,000 for Toronto, Vancouver, and Victoria. Moreover, the total mortgage amount could not exceed four times the household income, or 4.5 times in these three higher-cost cities.

Critics, including James Laird, co-CEO of Ratehub.ca and president of CanWise, have pointed out the program’s shortcomings. Laird highlighted that the incentive failed to assist buyers in meeting the minimum down payment requirements and that its restrictions often resulted in qualified borrowers receiving lesser amounts than needed. He also criticized the complexity and lack of industry insight in the program’s design, calling it a “convoluted program that was poorly thought out.”

While the government already supports first-time buyers through uninsured mortgage backing, Laird suggests extending amortization periods to 30 years as a more straightforward solution to lower monthly housing costs without involving complex co-ownership agreements.

Launched in 2019 with a budget of $1.25 billion, the incentive program had allocated $329 million by the end of 2022, assisting approximately 18,500 first-time homebuyers. CMHC has yet to comment further on the program’s discontinuation.

Source: Canada’s first-time homebuyer incentive discontinued | CTV News