Government to allow longer amortizations for certain first-time buyers

First-time homebuyers purchasing newly built homes will be allowed 30-year amortization periods on insured mortgages, the federal government has announced.

Finance minister Chrystia Freeland said in Toronto on Thursday that the move would take effect on August 1 – and also announced that the government would increase the amount first-time buyers can withdraw from RRSPs to purchase a home from $35,000 to $60,000.

The latter change will be effective as of April 16, when the government unveils a budget that’s expected to focus heavily on housing measures.

For withdrawals made between January 1, 2022 and December 31, 2025, individuals will be given five years to begin repayment rather than the original two.

With housing affordability shooting increasingly out of reach for many younger Canadians and first-time buyers, the introduction of lengthier amortization periods has often been put forward as a possible solution within the mortgage industry.

“Faced with a shortage of housing options and increasingly high rents and home prices, many younger Canadians feel that the dream of homeownership is just that, a dream,” Freeland said earlier this morning. “Our government is changing that. We want homeownership to be a reality for younger Canadians.”

Announcement is latest in flurry of housing-related proposals by feds

Freeland also reported that over 750,000 First Home Savings Accounts (FHSAs) have been opened across Canada since the measure was announced last year. That account allows Canadians to put away up to $40,000 towards a home downpayment in a tax-free-in, tax-free-out arrangement.

In early March, the government announced it was discontinuing the First Time Home Buyer Incentive, a shared-equity program that aimed to ease the burden of saving up for a downpayment but saw little uptake in the country’s priciest markets.

As the governing Liberals ramp up preparations for next week’s budget announcement, Prime Minister Justin Trudeau also announced the introduction of a new $1.5-billion “Canada Rental Protection Fund” last Thursday in an effort to tackle the affordability crisis facing renters across the country.

CMP

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