In Toronto, where a first home can typically cost more than $1-million, new buyers were not sufficiently attracted to the CMHC-administered First-Time Home Buyer program.DONALD WEBER/The Globe and Mail
Ottawa has discontinued its $1.25-billion program to help first-time homebuyers after struggling to attract prospective homeowners since its introduction in 2019.
The First-Time Home Buyer Incentive program provided shared-equity mortgages directly from the federal government for homebuyers. It was designed to make homeownership more affordable by reducing the size of the borrower’s mortgage, as well as their monthly payments.
But the requirements were considered unrealistic in the country’s most expensive markets of Vancouver and Toronto, where the typical home price is above $1-million.
Under the program Ottawa would provide 5 or 10 per cent of the home purchase price and the buyer would repay the government loan when they sold the property or within 25 years, whichever was sooner.
In order to qualify, a buyer’s household income could not exceed $120,000 a year. The income threshold was $150,000 for residents in Toronto, Vancouver and Victoria. In addition, the purchase price could not exceed $1-million and the borrower was required to pay for mortgage insurance, which protects lenders if the homeowner defaults on loan payments.
“It will not be missed,” said Tuli Parubets, a mortgage agent with Mortgage Scout who works with homebuyers in the Toronto region. “What can you buy for $1-million? Not a whole lot,” she said.
The deadline for new or updated submissions for the incentive is March 21, according to program administrator Canada Mortgage and Housing Corp (CMHC.)
The program was launched in September, 2019, a few years after the real estate boom in Toronto and Vancouver sent property values soaring and priced many out of the market. The federal government was under pressure to rein in speculative buying and ensure that Canadians were not overloading on mortgage debt.
The Trudeau government was also facing calls to help young Canadians get into the housing market. The $1.25-billion plan was expected to help 100,000 first-time home buyers purchase property.
But five years later, only 22,827 homebuyers have been approved and only $409-million has been disbursed. CMHC did not immediately respond to a request for comment on the success of the program or what will occur with the unused funds.
The lowest number of approvals were in British Columbia and Ontario, home to the country’s priciest real estate markets.
In B.C., there are a total of 859 approved applicants as of the end of the third quarter of 2023, according to the most recent progress report on CMHC’s website. In Ontario, there are 1,425 approvals.
Atlantic Canada has 2,298 approvals; the Prairies have 3,340; Quebec at 7,105 and Alberta has the most at 7,800.
The mortgage industry has long criticized the program as ineffective and has said a better alternative is a 30-year amortization period for borrowers who have to get mortgage insurance.
Currently, the maximum amortization term for insured borrowers is 25 years. (Federal rules require borrowers to pay for mortgage insurance if their down payment is less than 20 per cent of the property’s purchase price.)
“It doesn’t put anyone in a riskier position. It gives them more time to pay it off,” James Laird, president of Toronto mortgage lender CanWise Financial, said of the longer amortization period.