Recent changes announced to the first-time home buyers incentive plan for Toronto, Vancouver, and Victoria won’t be as impactful as anticipated by proponents, according to LowestRates.ca.
Earlier this month, Canada Mortgage and Housing Corporation announced improved eligibility for applicants from these metropolitan areas, with the qualifying income threshold raised from $120,000 to $150,000 and the total borrowing threshold raised from 4 to 4.5 times of their qualifying income.
“With a minimum down payment, this targeted expansion raises the maximum house price for eligible first-time home buyers in these cities from about $505,000 – under the original program parameters – to about $722,000. The original parameters will remain the same for all other housing markets,” CMHC said at the time.
Leah Zlatkin of LowestRates.ca, said that, in effect, these changes boosted the maximum mortgage amount from $480,000 to $670,000.
However, while the adjustments were well intentioned, Zlatkin believes that they do not solve the fundamental problems that constrain a significant portion of would-be buyers.
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“Most applicants for mortgages in these markets have a combined income of over $150,000 and there is a dearth of homes available for $670,000 or less in these markets,” Zlatkin explained. “There are so many hoops to jump through, that it’s almost impossible to get. We’ve seen a lot of interest in this incentive in the past, but we have yet to process a successful application. These new changes aren’t likely to change things.”
Moreover, many first-time buyers enter home ownership under the assumption that they can sell the home in a few years’ time once the equity increases. Zlatkin warned that this essentially renders moot whatever advantages the revised incentive would be able to provide.
“Those gains are significantly depleted when it comes time to sell, as they will need to pay the government back the percentage they received of the current value of the home, not the value at the time of purchase,” Zlatkin said. “I don’t think most consumers realize that it’s the current value, not the value at the time of purchase.”