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Federal Government cancels the First Time Home Buyer Incentive

Canadian first-time home buyers now have one less tool to help them afford a new home down payment – though it admittedly wasn’t a very popular one to begin with.

The Canada Mortgage and Housing Corporation, the federal government’s Crown housing agency, has announced that it is discontinuing the First Time Home Buyers’ Incentive (FTHBI). According to a brief statement on the CMHC’s website, anyone who still wishes to utilize the program has until midnight EST on March 21, 2024 to send in their new or updated submission, with the program administrator ceasing all new approvals after March 31st.

In a statement emailed to lenders, the CMHC wrote, “As announced in Budget 2023, the Government of Canada committed to refocusing federal spending to continue to serve Canadians most effectively. Following a review of current federal housing programs, the First-Time Home Buyer Incentive (FTHBI) will be discontinued. The FTHBI has been undersubscribed and cannot provide significant impact to address housing challenges, as currently designed. This change ensures that the government continues to invest in areas focused on increasing housing supply and restoring affordability levels for Canadians.”

“This policy has been flawed from the beginning, so it is great to see it go,” says James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender. “It is a shame that it took them this long to admit the policy failure, but better late than never.”

“Allowing all consumers to amortize their mortgage over 30 years has always been a better way to help first time home buyers and would be an effective replacement for this program.”

First launched in September 2019 as part of the National Housing Strategy, the FTHBI offered qualifying first-time home buyers a unique approach to affording their home’s down payment, with an interest-free loan of 5 - 10% in exchange for the government sharing in the home’s equity. This meant the government would get a slice of any value appreciation in the property, as well as be impacted by any losses, up to a maximum of 8% per annum.

The purpose of the program was to give buyers’ down payments a boost, resulting in smaller mortgage payments. The buyer would then need to repay their FTHBI loan – plus the additional equity percentage –  whenever they sold the home, or at the 25-year ownership mark. The loan could be paid off at any time prior to that without penalty.

FTHBI was too limited for big-city buyers

While it seemed a keen approach on paper, the FTHBI struggled to find its footing among the Canadian marketplace. It received flack for its restrictive income requirements and home value caps, which critics said were unrealistic in many of Canada’s major housing markets. To qualify, buyers had to have annual incomes of $120,000 or less, with the combined incentive and mortgage capped at four times the income of the buyer. While this was extended to $150,000 for Toronto, Vancouver, and Victoria in May 2021, the program could still only be utilized for insured mortgages, with a purchase price of under $1 million. This still greatly limited the type of applicable housing stock in Canada’s priciest cities.

While the original goal of the FTHBI was to help 100,000 families purchase a home with a spend of $1.25 billion over three years, it was revealed to parliament last May that fewer than 400 households had actually used it. At the time, the government announced its intention to extend the program through 2025 – but it appears to have changed its mind.

Other First-Time Home Buyer Programs available for Canadians

Fortunately, Canadians looking to step onto the property ladder for the first time still have a number of government-provided grants, tax breaks, and programs they can use, such as the RRSP Home Buyers’ Plan, the new First Home Savings Account, and First Time Home Buyers’ Tax Credit (FTHBTC). Depending on your municipality and province, you may also be eligible for land transfer tax rebates if you’re a first-time purchaser.

Check out our roundup of the first time home buyer programs available in Canada here.

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Penelope Graham, Head of Content

Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.