Much-anticipated changes to the First Time Home Buyer program were inked early last week. In early December 2020, plans for change had been announced, the Department of Finance and Canada Mortgage and Housing Corporation (CMHC) put that into action in modifying the program's eligibility requirements for buyers in Vancouver, Victoria and Toronto.
The FTHBI is an incentive program the government first introduced in September 2019, which grants anywhere between 5%-10% to a first time home buyer's down payment. The maximum household income has been raised to $150,000 from $125,000 for eligible borrowers
The changes to the incentive are only applicable to the cities mentioned above, as the initial requirements will remain intact for the rest of the country.
“Our government recognizes that making the choice to own for the first time is a challenge, especially in major markets where housing costs are rising fastest,” said Adam Vaughan, Parliamentary Secretary to the Minister of Families, Children and Social Development and the Minister responsible for the CMHC. “To that end, the new enhancements under the Incentive increases the eligibility of the program in Toronto, Vancouver and Victoria.”
The new maximum household income allows eligible first-time buyers to qualify for home prices of up to $722,000, a substantial increase from the $505,000 for participants facing the original criteria.
The average Canadian home price has soared to a whopping a $716,000, as per data released by the Canadian Real Estate Association. If we were to eliminate the incredibly costly markets of greater Toronto and Vancouver, the national average home price would surprisingly still sit at $556,828.
It begs the question, will these changes realistically help first time-buyers pressed by rising home prices, and a seemingly impossible and elusive entry into the market?
Paul Taylor, President and CEO of Mortgage Professionals Canada believes the answer is no. “Even with the increased 4.5 times income, all eligible participants would actually be able to borrow more using a traditional 5% down insured mortgage. As such, it won’t really create any new market entrants. It will provide an option for those who already qualify, in very specific parameters, to reduce their monthly payments at the tradeoff of home equity.”