05 Apr
The main objective of the First-Time Home Buyer Program (FTHBP) was to ensure that Canadians would be able to afford a home and become houseowners. However, a mortgage industry group says that the program has failed in its objective to give more Canadians an effective avenue to home ownership.
Mortgage Professionals Canada has condemned the Federal Government for their inability to address the housing affordability crisis in the current market situation. They have revealed that the FTHBP launched by the government was a major point of failure. FTHBP was initialised in September 2019 which offered 5% of the down payment for a first-time buyer’s purchase of an existing residential property, or 10% for a newly built home.
However, the program was not able to achieve its objectives of providing Canadians with an effective avenue to homeownership, MPC argued.
“The government’s well0intended current First-Time Home Buyers Incentive program, whereby first-time homebuyers can obtain an equity mortgage from the government, is simply failing. Most recent data shows that the First-time Home Buyer Incentive program participation is less than one-third of the government’s stated initial goal.” Said Veronica Love, vice chair of MPC.
One of the major factors that has rendered the program ineffective is because of technical redundance. This is because many clients do not appreciate the idea of being co-owner of a home with the government and borrowers are trying to avoid it. Veronica Love highlighted that a same outcome can be achieved through other mortgage lenders when applying for an insurable 30-year amortisation, which is promoted by FTHBP. Moreover, the monthly payment for buyers is also reduced and there is much less complexity involved when buying a house by obtaining funds from a private mortgage lender.
Furthermore, because of the low supply of houses in Canada and the increased demand, buyers are automatically preferring to borrow funds from mortgage lenders or private lenders because the legal costs to buy and sell the home are less than the FTHBP. Veronica Love also argued that if homebuyers are able to meet the restrictive criteria of FTHBP, then they would probably meet the mortgage criteria of other mortgage providers.
Chief executive of MPC, Paul Taylor discussed that the spring federal budget is on the horizon and that they are hoping to see policy solutions that are able to address both the supply and demands for homes, as opposed to focusing largely on policies that tamps down demands.
“If we had historically equally considered the demand-side and supply-side policies, we probably would be far in a far better position. It’s just we’ve had a very sole focus, I would say, from a policy perspective on the demand side.”
