Canada cancels first-time home buyer incentive

Canada’s housing agency says it is ending the first-time homebuyer incentive program, which many had criticized as unhelpful.

According to the Canadian Press, Canada Mortgage and Housing Corp. said in a notice on its website that the deadline for new or updated submissions to the program is midnight Eastern time on March 21.

The plan was meant to help first-time buyers by having the government take on partial ownership of their property.

The government offered a loan of five or 10 per cent of the purchase price that would go toward a larger down payment, with the intended goal of reducing monthly payments.

Under the program, homeowners have to repay the incentive after 25 years or when the property is sold, with the amount owing adjusted to reflect how the value of the property has changed.

The program was hampered in part by eligibility issues including limits to household income and the size of a mortgage the buyer could take on.

Total borrower income couldn’t be higher than $120,000, or $150,000 in Toronto, Vancouver or Victoria, while the total borrowing could be no more than four times the qualifying income, or 4.5 times in the three pricey cities.

The program wasn’t useful since it didn’t help buyers put together a minimum down payment, and the restrictions meant some borrowers qualified for smaller amounts than they otherwise would, said James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender.

The government-ownership component also added complications to a convoluted program that was poorly thought out, he said.

“It was literally like they sat in a room by themselves, without anyone who understood the industry, and just made up a bunch of stuff that made no sense,” said Laird.

The government already helps first-time buyers by backing uninsured mortgages, but if they want to do more they could allow amortizations to be stretch out over 30 years, he said.

“It lowers the monthly cost … and there’s no complicated co-ownership agreement.”

The first-time homebuyer incentive was launched in 2019 with a $1.25-billion commitment. As of the end of 2022, CMHC had committed $329 million representing about 18,500 applications.

CMHC did not immediately provide a comment.

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Bidding wars threaten Toronto housing market as home sales jump by 37%

Greater Toronto home sales soared 37% in January / February compared with the same month a year ago as lower borrowing costs associated with fixed-rate mortgages lured some buyers back to the market. Bidding wars are also storming back in some choice Toronto GTA locations.

Last month’s 4,223 home sales also marked a 22.9 per cent month-over-month increase from December, according to data released Tuesday by the Toronto Regional Real Estate Board.

It said the market is tighter than it was a year ago as new listings increased by 6.1 per cent, but didn’t keep pace with demand.

Sales were up across all housing categories in the region on an annual basis, led by townhouses at 54.5 per cent and semi-detached homes at 42.9 per cent. The number of condominiums that changed hands was 41 per cent higher than a year ago, as detached home sales rose 27 per cent.

Meanwhile, the average home price dropped one per cent from the same time last year to $1,026,703, which was also a 5.4 per cent decrease from the final month of 2023.

TRREB president Jennifer Pearce called it a positive start to the year.

“The Bank of Canada expects the rate of inflation to recede as we move through the year. This would support lower interest rates which would bolster homebuyers’ confidence to move back into the market,” she said in a news release.

“First-time buyers currently facing high average rents would benefit from lower mortgage rates, making the move to homeownership more affordable.”

The board’s chief market analyst Jason Mercer added that once the central bank starts cutting its key rate from the current five per cent, likely in the second half of 2024, more competition between buyers amid constrained supply will push prices higher.

“Prices will continue to go up,” said Jessica Hammell, a broker who focuses on downtown and midtown Toronto properties for Real Broker Ontario.

Amid rising demand, she said “it’s not a time to sit and wait and see what happens” for those considering a home purchase.

“It definitely behoves people to start at least making plans, like evaluating their circumstances, getting that pre-approval to see where they stand and taking calculated action,” she said.

The Bank of Canada has expressed caution about the potential effect on the housing market should it move too quickly to lower its policy rate.

In a summary of governing council deliberations that led to December’s decision to hold the rate steady, members said easing financial conditions prematurely could prompt a rebound for Canada’s housing market, further fuelling inflationary pressures.

But Hammell said many prospective buyers aren’t waiting for better borrowing conditions to make their move.

“Even the promise of rates coming down in the near future has definitely helped people feel more comfortable taking action,” she said.

“I think buyers are savvy now. They know that when things start trending down with rates, prices are going to come back up. They’re seeing this opportunity and they’re seizing it.”

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