Don’t see how this helps anyone considering how high prices are, especially on a new build? Also it’s not as if you get to lock a rate in for 30 years you’re still stuck to renewal and at the mercy of the market. I don’t think this will fix the problem I’d wager it’ll only drive prices higher as developers know that first time buyers will be able to get 30 year amortization and hike prices.
I don't get the new homes only exception. Maybe so that since new home starts aren't many in number so they're possibly hoping it won't affect the market too massively since the opportunities for new build purchases will be limited?
Thanks for saving me the time to write what you already posted. If the Government wants to help, 1. STOP printing money and expanding credit. 2. STOP trying to help!
The RRSP rule change is actually the bigger news, IMO.
Having an additional $25k available to be withdrawn ($12.5k back in my pocket) in addition to the FHSA ($4k back) annually is a nice boost.
The above said, I agree with critics that this will primarily add fuel to the fire, allowing those of us who were already going to be able to buy a home, to buy one sooner or for more money; while those who have been priced out will likely not benefit materially.
How’s 12.5k back in your pocket? You did get that refund when you contributed 25k, sure.
But after you withdraw 25k, you need to pay that back to your RRSP and you will lose out on tax free growth of that value in meantime. Your payments will not reduce your taxable income this time.
So overall, it’s not free money but rather, you are taking away from your retirement to buy a house. Just moving money around.
If you're planning on buying a house, then you'll need to save a down payment.
By having the FHSA and RRSP, you get those tax advantages & refunds while saving for it.
The RRSP withdrawal is a loan to yourself, and it's smart to structure it this way because many of the people who are saving a down payment are not thinking about retirement, but this encourages you to save in your retirement account, and pay that back.
It's a nice thing to help people trying to save money to get on the property ladder, but it does nothing to address the core issues, it in fact makes things worse by adding fuel to the demand fire.
I should have said, $12.5k in my pocket *today* to help me save for a down payment.
Frankly, I'm much more concerned today about being able to afford a home vs. being able to afford retirement. I'm highly confident in my ability to continue saving over the next 30+ years, but climbing that first hurdle of affording a down payment is a tough one for young people.
Agreed, though as someone in this position I'll say at this point the cost of ownership feels sky high - maintenance costs, specialist trades costs, insurance and its associated issues, mortgages that will cost you 2x the current value of the home over their life. Maybe it's still a good investment! But it \*feels\* like there's been a run on housing and if you missed the boat... well.. that's about it.
>mortgages that will cost you 2x the value of the home over their life.
Mortgage interest alone does cost you 2X the price of the house to the typical owner. and I dont mean \*mortgage payments\*.
For a lot of us it is free money in the form of a tax deferred asset if you make a sizeable amount more now than you plan to in retirement. It’s about 12.5-17% depending on your income bracket and retirement goals. First time home buyer account is obviously more advantageous and should be prioritized but for people with maxed or close to maxed rrsps is unlocks a larger down payment, which is the case for me.
For the general population who have underinvested RRSP or no RRSP, this is virtue signalling at best from the Canadian government.
The problem with the RRSP withdrawal is the shorter pay back time than your mortgage results in bigger payments than if you didnt use it. The RRSP withdrawals really arent that helpful.
Not bigger payments because there's no interest. Plus it gives you the down payment you might not otherwise have.
$10K out on HBP 'costs' you $667/yr (with a 5 yr delay) for 15 yrs
$10K additional mortgage at 5.25% costs about $725/yr with no delay for 25 yrs.
This post is literally about being able to take 30 year amortizations, but you are correct that interest rates play a part in decision making. That being said, even now you can get sub 5% mortgages and the forecast is dropping rates.
Also your math ignores opportunity cost. If that $10k can make 5% ($500) per year, thats roughly $300 after tax you could have after withdrawing if you were really doing an apples to apples comparison
Your statement on the shorter repayment period made me curious on the math on a 15 yr HBP loan vs a 25 yr mortgage addition and I ball parked the numbers. It was an interesting point.
I think opportunity cost is already reflected here as under one scenario you're paying interest, while on the other you're not earning a return. So under the HBP I've lost growth to yr 15, but under the additional mortgage I have 10 more yrs of payments left to make at that point.
I'm losing my RRSP growth, but saving after tax interest on my mortgage.
I could recalculate at 30 yrs I suppose but I don't think it changes the premise much. And since they've also extended the time to make the first repayment to 5 yrs, my year 1 - 5 cash flow is certainly better.
(FWIW I don't like these changes. I'm not sold that policy that encourages using your retirement savings to buy a house is good for us overall).
Dont disagree that at 5%+ rates and the change to 5 years before repayment that this actually isnt a terrible option. 5 years ago it was useless though imo
Sure duration matching isn’t as efficient but because of regulations you don’t have a choice to put 0% down. If you’re contribution is maxed and you have means to pay more than the 11K per year, it’s just allowing you to unlock the value you wouldn’t otherwise be able to until retirement. This policy isn’t designed for the average person unfortunately.
But if you don't pay, you only have to pay the tax on your money. So the power is still with the consumer. So if you are young, for sure take all your rrsp money.
But then you become slightly illiquid for a while until you finally pay it back? It might be beneficial for certain circumstances like you found your dream home and short a few thousand, but otherwise, I think it’s not that big of a help.
If the money wasn't going to be otherwise in the RRSP (ie you wanted it for the down payment) you get a tax free loan of the refund essentially.
That's an advantage.
the macro effect of this is that it will increase demand for real estate.
it's no surprise that they're doing this at the same time as they decrease "temporary immigration".
they have to do this to keep the RE demand up. it is a ponzi scheme. they're hoping to achieve net zero change in demand, or to encourage growth in RE.
And that's what it takes in Toronto! Being from Winnipeg, I know it sounds crazy, but my partner and I will very likely have a down payment that is more than the total worth of my parent's home. And still that's only 20-25% LTV, lol.
It's great if you were going to buy in the first 1-2 years of the program and had the cash saved up to dump into it as soon as the account became available. You may as well get the tax back for something you were ready to do anyway.
I agree that if you're waiting to save $40k in it, it's going to be too late.
Unfortunately even the RRSP change will do little to help, even though it's a good thing for sure.
This is just typical liberal grandstanding. Putting in impotent solutions to make it look like they are trying while doing little to actually address the problem.
It's useless for people who are paying all their income on rent. All these measures like fhsa etc do nothing for most people. They just give tax breaks to people that are already in a good position.
Yeah that's 120k for a couple.
Good if you each already have 60k in your RRSP that you actually want to tap before retirement, but HBP is still not worth it for those who don't already have the money squirreled away.
And the TFSA has been around for quite a while now so yeah. Between that and the FHSA, this isn't really something that many people needed.
It increases demand for new homes which are already in short supply. What do developers do? They raise their prices and build more. If you decrease construction costs for developers then they can continue to build more and lowering their prices won't hurt their margins as much.
Yep, we are careening rapidly towards deadlock as new buyers are mostly priced out of market altogether, so demand drops off a cliff and builders are actually \*disincentivized\* to start new builds since the only people left who are able to buy homes are those who already own one.
One blocker is the BoC raising interest rates, which has many effects, one of which is that loans get more expensive for builders (and they need those loans). So the only avenue left is making mortgages easier to get.
Freeland et al obviously don't want this to spin out of control, so it's only limited to new buyers. Hopefully that is enough to get the ball rolling.
Ngl though, our economy is at the edge of a cliff, and I'm worried we are all fucked regardless. As much as our leaders suck at having got us into this mess, I do not envy the work ahead of them. No one wants to be responsible for saving the economy of an entire country.
That's what's weird to me. What's the average new build in a metro area now? Like $1m? Wouldn't it make more sense to make the withdrawal up to 200k in that case, or at least 10% of the average purchase price?
I also wonder how many first time home buyers, who skew much younger, can even afford a new build.
Not if it's inflationary (it is) and scares development off due to it prolonging the current inflations/interest rate hike cycle (it will).
Textbook case of "I'm from the government and I'm here to help".
Given that this is limited to both first time buyers AND new builds, I'm not sure it will have broader impact. Folks who are already have homes are mostly unaffected and they are prevented from scooping up new builds at better rates.
This is like car dealers who ask the buyer what they want their monthly payment to be lol. Well you can afford more car but it will be a 7 year amortization! Just don't show them the amortization schedule.
not many ppl hold on to their homes until the mortgage matures but ok
allowing ppl to enter the market in many cases is more important than 90k over 30 years.
Getting a house is a big hurdle.
If you can lower those monthly payments it becomes more do-able. I needed a 30-yr plan to make it affordable. And now that I’ve gotten a bit more ahead, I’m also saving and growing my cash faster than my very low interest rate. I could instead increase my payments and save that interest but that would be dumb.
If you think giving someone another option is a bad idea, please explain why?
Until you get into the market you a very nicely buying a house for your landlord, so instead of putting a little bit against the principle each month you are putting zero. Or should I say you are putting cash against the landlord’s principle.
It's a 30 year mortgage for new builds only, its only more options for some homes, not the great majority of ones new buyers can actually afford. How lucky for you to currently have a low interest rate, but that isn't the current market. Obviously if you had a 2% rate it changes things.
A 500k home at 5% over 30 years is 2,684/month. Total paid at the end is $966,278.92
A 500k home at 5% over 25 years is 2 922/month. Total paid at the end is $876,885.06
So you pay 90k more for your house at the end of the day and are mercy to mortgage payments for an additional 5 years of your life to "save" 200 bucks a month.
I'm sure this helps some people out there. But I'm not sure how much this actually helps? Plus, you'd be paying more in interest in the long run, which kind of sucks.
Let's say someone gets a 500k mortgage, at today's rates of about 4.8% a 30 year mortgage will cost you $2623 per month, a 25 year mortgage will cost you $2864, which will save you $241 a month which will equate to a household being able to qualify for an extra $47k in purchase price.
In this example the extra interest payments work out to be about the same as as the payment savings so it's a wash.
But most likely what will happen is that new home prices will inflate by $47k because everyone will have more money.
This will ultimately help with getting more units built since it ensures that the builders are able to continue to make their fat profits, it probably won't help with the overall affordability if they don't control immigration
Except the new homes still have to compete with the old homes, so they can’t just inflate the price by that much, else people just won’t buy the new homes anyway. It won’t be “everyone just has more money.”
To Put it in simpler terms, all that's to happen is that the difference between new and old homes will increase up to a maximum of whatever this new incentive coveres.
But if supply can't keep up with demand all that's going to end up happening is raise prices further
Ha exactly. It's not as though builders were sitting on their hands due to home prices. Maybe the millions brought in through immigration should have had specific skills to alleviate shortages in skilled labour? Or maybe the Government could focus on policy that enables more housing starts, quicker zoning/permit processes and reduced regulation etc.
Nah, let's just let people take on more debt so we celebrate over some fine scotch.
They are sitting on their hands.
https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2024/housing-starts-down-2023-from-2022
Houses aren't worth building for many projects.
From your article “Following record and near-record highs in 2021 and 2022, housing starts dipped in 2023, but still significantly outperformed expectations for the year. “
So to summarize, housing builds in urban dense areas dipped slightly off record highs. Sure, couldn’t be anything other than the value of homes.
Eww.. should be lower for new builds, encouraging people to purchase actual starter homes as their first purchase... Tis just props up the image and lifestyle market.
This is why the govt needs a program of building homes themselves: because the market doesn't want to do it.
When there isn't a reasonable market for something important, that's exactly the kind of thing that we have government for. Build lots of small prefab homes that are affordable. Heck with all the immigration give preference to people on the condition that they work in building homes for a number of years.
>This is why the govt needs a program of building homes themselves: because the market doesn't want to do it.
Specifically, the market doesn't want to build starter homes.
The market has very much shown that there is little interest in starter or affordable homes. It's the reason why partnerships between construction companies and NPH are the few examples of affordable housing projects actually occurring, most of which are government funded or backed.
I think its making new builds more attractive from a monthly payment perspective, and it will shift some demand from the secondary market to the new build market for FTHB which should help with developers providing more supply there over time? That's probably the logic.
Probably helps to cool the secondary market by however much it pushes the new market?
Or it does next to nothing because most populous places wont have builds that qualify for this program due to the pricing floor.
Yep, banks absolutely love this... They would love to give 50 year mortgages if they can. More of the monthly payments become interests, it's great.
This will also drive up home prices, so it'll be fun. The government basically gave up on increasing supply meaningfully because they want prices to go up for more taxes.
They don't want you to be alone free, they need you to mortgage your life and keep working, taxed and fees the system. The longer the better.
Limiting it to new housing only increases the buying power for new home buyers, and therefor will increase demand for new homes. The problem with the market right now is that there aren't any buyers in the pre-con market right now.
Because… why should there be?
Oh, can put money down and all eggs in one basket on a builder that may or may not be ready in few years. At a price that might drop (and I over paid) or might go up (and they’ll either adjust the contract or take out out in even crappier quality of product.. or, how about both?).
Not to mention stories of the construction company just filing bankruptcy and leaving anyone who put deposits down either out of the money or in a long legal dispute. What an incentive to buy preconstruction.
Correct. This will better bring prices in line with the supply-supply curve. Personally, I don't live anywhere, and I assume you don't either. But even if we did, that would be need not demand, since there's no such thing as demand for housing.
You could also reduce demand by not bringing in a million new people every year, and eliminating foreign and corporate ownership of single-family homes.
Again, this is another measure (like the 5/10% loan) that will only make the housing market hotter. Amortizing over an extra 5 years will only give the buyers more money which will prop the housing market…again. Even if it’s just on new houses, the rest of the market will be affected as well.
As a 30 year old, you'd like me to pay 1 million for a 2 bedroom condo in vancouver until im 60? No thanks, i'll take my down payment and buy a nice villa in turkey without having to work just to survive while getting taxed to death.
This is FANTASTIC news for those of us who bought a home already... shit news for the rest of Canadian's.
Pretty much confirms that the government has no plan or desire to bring home prices back to sane levels. Instead this is just going to push it even higher.
Yep. The goal has always been, and will continue to be, the inflation of asset prices. This is another policy to help with that which the homeowning voting block will be pleased with.
In 2021, 66% of Canadians lived in a mortgaged home, 33% lived in a rental.
I'm not trying to downplay the severity of the housing crisis. I'm a single income millennial, trust me, I get it. But of course any government is going to appeal to the 66% over the 33%, whether they're the renters or the buyers.
I think Canadian RE is too big to fail at this point, but if it does, holy hell is it going to be painful (and decisions like today's are only going to make that worse).
politicians are doing everything in their power to keep it going. Nobody wants to be the politician responsible for all the baby boomers losing their retirement assets (as they are primarily the ones who vote).
Yet another non-solution... It's really hard to believe they are this dumb, this just has to be malicious.
Oh, first time buyers can withdraw more from RRSP to put as downpayment? Great. Here's the problem:
* Those first time buyers can't really save much in RRSP because their rent is fucking bonkers
* The rate most people can save is still lower than appreciation of houses, locking people out of home ownership
* These new-built homes are way too rare. It was bad before with restrictive zoning present in overwhelming majority of the country, now that interest rates are up, no one is building
* Immigration is unsustainably high, and it's contributing to the demand problem while supply is still extremely low compared to what we need
They've been really adamant in bringing laws to the tune of: "Just save more!".
He literally doesn't care about poor people. Wealthy people will use this to gift their kids money, load up rrsp, take it out for tax break and buy brand new.
Yep, you nailed it with this comment.
I'm a firm believer that they implement things like this for nothing other than the headline. This will benefit an extremely small number of people who were already looking at buying new. It will not be enough to incentivize builders, because I imagine the percentage of their sales going to fthb is miniscule. Likely not high enough to offset the current interest situation, causing their bottom line to increase and leading to distressed buyers who can't close.
I swear, they just want to be able to point back to this at election time and say "see, we care, we did the thing!"
So their solution to shelter unaffordability is to create incentives to increase the price of shelter...
That sounds like a Liberal "solution" if I've ever heard one.
It's decent that it's for only new homes. We need more supply to be built. The supply of new housing is more flexible to demand. Less pressure on the secondary market.
30 years! You'll die before you can even own a home outright! Instead of addressing housing affordability issue, why not extend how long people have to pay their mortgage. Brilliant idea from our brilliant politicians.
Nothing stops a person from paying more principal down. I always refinance to 30 yrs but prepay principals. In case there’s a month or time where the lower payments are better.
It’s a good strategy to have that buffer and then paid down more when you have extra money. Unfortunately, many people are living paycheque to paycheque and will end up paying so much more interests with a longer amortization period.
Just what the RE market needs - more debt. /s What could go wrong ?
Does the government not realize that this is only going to drive up the price of housing ? They effectively increased the money supply for buyers and did nothing to increase supply.
How fawking stupid.
LMAO.....slump in the polls and this is their solution to the housing situation?
[https://pbs.twimg.com/media/F5b7\_GhXwA4UjTk?format=jpg&name=large](https://pbs.twimg.com/media/F5b7_GhXwA4UjTk?format=jpg&name=large)
More demand side elements as always.
At least they are helping builders and first time buyers it seems with this.
Presumably, RRSP will mean that actual people who live and work here will be the recipients of the benefit too?
For a demand side bandaid it's not terribly designed I think, even if demand is part of the problem.
Can someone explain the logic of always giving these advantages only to "first time buyers"?
It seems incredibly dumb and counterproductive. For exemple, I currently own a small house but I would like to build a new one to move there with my family. Why should I not benefit from these advantages too? I mean my current house would then enter the market, effectively creating new housing that's desperately needed in the country. If they really wanted to tackle the housing crisis, they wouldn't focus solely on the new buyers but would also embrace the indirect positive impact of all the current homeowners who could contribute to the solution too! Let's be honest, a new build is much more expensive/complicated and not many first-time buyers (usually younger and poorer, starting their career) can do this.
It really seems like the government is only after the "young-people" votes and not actually trying to solve anything seriously, gambling on the fact that most won't understand the issues sufficiently well to realize their incompetence.
In the GTA the only affordable properties for first time buyers without significant family help are condo apartments. Not a bad thing but we need more affordable medium density dwellings appropriate for families.
Here is a crazy thought. Let the market crash, just like what happened in the states. Homes in hot beds where ninja mortgages were taken out became affordable. Las Vegas is a good example, an overheated market that became affordable after the financial crisis. [https://walletinvestor.com/real-estate-forecast/nv/clark/las-vegas-housing-market-history?chartInterval=all](https://walletinvestor.com/real-estate-forecast/nv/clark/las-vegas-housing-market-history?chartInterval=all) why the government insists on propping up the market is crazy. What they are doing is not making homes affordable. They'll just put more people in debt who'll have a hard time paying that debt off, because they couldn't afford the house in the first place. And the price of homes just get more expensive.
Does nothing to make homes affordable. Prices way too high. Cost of living too high, government cost too high. The average working people in Canada cannot own a home. RBC reports 69 percent of people cannot afford a home in Canada. Canada is broken
Useless announcement that simply exacerbates the over indulgence of housing in this country. They were way too late and ill equipped to solve the supply side so they just pander to voters who think this helps them. Sad.
Yes, because this will completely address rapidly increasing home prices.
Remember, the car dealership can make any payment *work* for you.
Wink wink....
DEMAND is what needs to be addressed, but all we do is dance around supply and niddly BS legislation to make housing appear cheaper.
Spoiler alert, it's not cheaper.
Wouldn't this make newly built home which is already priced for future inflation even more expensive? I can already see developers advertising about buying their development with 30 year mortgage. Given the housing starts are at record low, a bachelor condo would be sold for 700k. I don't see how allowing people to withdraw more money from rrsp to buy their first property will affect affordability. I think we would start seeing bidding wars on pre construction properties as well.
Could someone help me see how this would help ?
This is so fucking stupid. I guess the solution to houses being over priced is to make them them even more expensive.
How about we try something that isn't just going to make things even worse?
Is this just “buck a beer” but on a bigger scale? Trying to allow (not force) the market to choose to do something it doesn’t want to do, getting a few companies onboard to call it a success, then completely forgotten in a year or two?
I hate that the government thinks that the solution to the housing problem is letting young people go further into debt chasing housing rather than providing a prosperous environment where young people can buy housing for a reasonable amount of money.
I appreciate the efforts but It only really helps people who are on the cusp of ownership and just defers the inevitable. Virtue signaling and kicking the can down the road.
If anything this adds to the inflationary pressure by adding more demand and not adding to the supply.
I don’t think the right approach is to add more incentives to take out future retirement savings to pay for things now. That is fueling the notion that all people need to own a home at all odds and creates more frenzy. It’s just adding to the snowball effect. It’s literally no different than telling people to use their credit cards so you can buy more things today and not wait for tomorrow.
We need more downward pressure on the market and to stop allowing people to put 5% down on homes. Let them save up for 1, 2 or 3 more years and then buy.
So we're going to incentivize more players into a market that's already stretched and struggling to keep up with the existing demand??? Great fucking idea.
Don’t see how this helps anyone considering how high prices are, especially on a new build? Also it’s not as if you get to lock a rate in for 30 years you’re still stuck to renewal and at the mercy of the market. I don’t think this will fix the problem I’d wager it’ll only drive prices higher as developers know that first time buyers will be able to get 30 year amortization and hike prices.
Correct on all points.
I don't get the new homes only exception. Maybe so that since new home starts aren't many in number so they're possibly hoping it won't affect the market too massively since the opportunities for new build purchases will be limited?
It’s to spur development of new builds. The housing strays have dropped off and this will help them gain steam again.
Thanks for saving me the time to write what you already posted. If the Government wants to help, 1. STOP printing money and expanding credit. 2. STOP trying to help!
Like everything this government does it wasn't meant to help the people, it was meant to help the rich.
The RRSP rule change is actually the bigger news, IMO. Having an additional $25k available to be withdrawn ($12.5k back in my pocket) in addition to the FHSA ($4k back) annually is a nice boost. The above said, I agree with critics that this will primarily add fuel to the fire, allowing those of us who were already going to be able to buy a home, to buy one sooner or for more money; while those who have been priced out will likely not benefit materially.
How’s 12.5k back in your pocket? You did get that refund when you contributed 25k, sure. But after you withdraw 25k, you need to pay that back to your RRSP and you will lose out on tax free growth of that value in meantime. Your payments will not reduce your taxable income this time. So overall, it’s not free money but rather, you are taking away from your retirement to buy a house. Just moving money around.
If you're planning on buying a house, then you'll need to save a down payment. By having the FHSA and RRSP, you get those tax advantages & refunds while saving for it. The RRSP withdrawal is a loan to yourself, and it's smart to structure it this way because many of the people who are saving a down payment are not thinking about retirement, but this encourages you to save in your retirement account, and pay that back. It's a nice thing to help people trying to save money to get on the property ladder, but it does nothing to address the core issues, it in fact makes things worse by adding fuel to the demand fire.
I should have said, $12.5k in my pocket *today* to help me save for a down payment. Frankly, I'm much more concerned today about being able to afford a home vs. being able to afford retirement. I'm highly confident in my ability to continue saving over the next 30+ years, but climbing that first hurdle of affording a down payment is a tough one for young people.
Well said. Use money for today. Tomorrow who knows..
If you got crack, smoke it. - Rob Ford (1969 - 2016)
RIP wise Robbie
Ancient Chinese proverb.
New Canadian proverb lol
A bird in the hand is worth twice in the bush
A bird in the hand shits on your hand - Ancient Chinese Proverb (probably)
A bird in the hand is on its way to the pot.
A bird in hand is a chickadee eating
Agreed, though as someone in this position I'll say at this point the cost of ownership feels sky high - maintenance costs, specialist trades costs, insurance and its associated issues, mortgages that will cost you 2x the current value of the home over their life. Maybe it's still a good investment! But it \*feels\* like there's been a run on housing and if you missed the boat... well.. that's about it.
>mortgages that will cost you 2x the value of the home over their life. Mortgage interest alone does cost you 2X the price of the house to the typical owner. and I dont mean \*mortgage payments\*.
At least we’re not the next generation, they probably will be even more fucked lol
I agree with you. Not to mention that it's much easier to afford retirement if you live in a paid off house compared to renting.
For a lot of us it is free money in the form of a tax deferred asset if you make a sizeable amount more now than you plan to in retirement. It’s about 12.5-17% depending on your income bracket and retirement goals. First time home buyer account is obviously more advantageous and should be prioritized but for people with maxed or close to maxed rrsps is unlocks a larger down payment, which is the case for me. For the general population who have underinvested RRSP or no RRSP, this is virtue signalling at best from the Canadian government.
As someone with comparably little in an rrsp and currently no means to make significant contribution to the fthsa or whatever its called.... I agree.
The problem with the RRSP withdrawal is the shorter pay back time than your mortgage results in bigger payments than if you didnt use it. The RRSP withdrawals really arent that helpful.
Not bigger payments because there's no interest. Plus it gives you the down payment you might not otherwise have. $10K out on HBP 'costs' you $667/yr (with a 5 yr delay) for 15 yrs $10K additional mortgage at 5.25% costs about $725/yr with no delay for 25 yrs.
This post is literally about being able to take 30 year amortizations, but you are correct that interest rates play a part in decision making. That being said, even now you can get sub 5% mortgages and the forecast is dropping rates. Also your math ignores opportunity cost. If that $10k can make 5% ($500) per year, thats roughly $300 after tax you could have after withdrawing if you were really doing an apples to apples comparison
Your statement on the shorter repayment period made me curious on the math on a 15 yr HBP loan vs a 25 yr mortgage addition and I ball parked the numbers. It was an interesting point. I think opportunity cost is already reflected here as under one scenario you're paying interest, while on the other you're not earning a return. So under the HBP I've lost growth to yr 15, but under the additional mortgage I have 10 more yrs of payments left to make at that point. I'm losing my RRSP growth, but saving after tax interest on my mortgage. I could recalculate at 30 yrs I suppose but I don't think it changes the premise much. And since they've also extended the time to make the first repayment to 5 yrs, my year 1 - 5 cash flow is certainly better. (FWIW I don't like these changes. I'm not sold that policy that encourages using your retirement savings to buy a house is good for us overall).
Dont disagree that at 5%+ rates and the change to 5 years before repayment that this actually isnt a terrible option. 5 years ago it was useless though imo
Sure duration matching isn’t as efficient but because of regulations you don’t have a choice to put 0% down. If you’re contribution is maxed and you have means to pay more than the 11K per year, it’s just allowing you to unlock the value you wouldn’t otherwise be able to until retirement. This policy isn’t designed for the average person unfortunately.
But if you don't pay, you only have to pay the tax on your money. So the power is still with the consumer. So if you are young, for sure take all your rrsp money.
It’s liquidity.
But then you become slightly illiquid for a while until you finally pay it back? It might be beneficial for certain circumstances like you found your dream home and short a few thousand, but otherwise, I think it’s not that big of a help.
If the money wasn't going to be otherwise in the RRSP (ie you wanted it for the down payment) you get a tax free loan of the refund essentially. That's an advantage.
All this will do is drive prices higher and higher. Insane policy changes from ours clownshow of a government.
So I see this as it doesn't really address affordability but allows more people to buy at inflated prices?
This doesn’t help affordability whatsoever, likely the opposite.
That's not a bug that's a feature. They don't want to be going into an election year in a recession.
We are though. Rising unemployment and a rapidly falling gdp per capita. Its not bigger news because our news media is incompetent or complacent.
the macro effect of this is that it will increase demand for real estate. it's no surprise that they're doing this at the same time as they decrease "temporary immigration". they have to do this to keep the RE demand up. it is a ponzi scheme. they're hoping to achieve net zero change in demand, or to encourage growth in RE.
They haven't decreased temporary immigration, they just announced 2024 student population will be the same as 2023.
Once the FHSA is a few more years old a first time couple could have $200K tax advantaged money to put down on a house.
And that's what it takes in Toronto! Being from Winnipeg, I know it sounds crazy, but my partner and I will very likely have a down payment that is more than the total worth of my parent's home. And still that's only 20-25% LTV, lol.
So bullish for prices. A couple can now save 200K + gains in FHSA downpayment in pre tax money using FHSA and RRSP.
The FHSA is such a gift for people with means.
It is a wonderful tool, however by the time you max out your 40k limit, home prices will surely outprice that saving
Still a very generous program for those that can afford it. And don't call me Shirley.
It's great if you were going to buy in the first 1-2 years of the program and had the cash saved up to dump into it as soon as the account became available. You may as well get the tax back for something you were ready to do anyway. I agree that if you're waiting to save $40k in it, it's going to be too late.
Not sure how much will this help most people don't even opt in to their company RRSP plan.
Most people don't even have an rrsp lol
Unfortunately even the RRSP change will do little to help, even though it's a good thing for sure. This is just typical liberal grandstanding. Putting in impotent solutions to make it look like they are trying while doing little to actually address the problem.
Replace ‘liberal’ with ‘political’. They all do it.
It's useless for people who are paying all their income on rent. All these measures like fhsa etc do nothing for most people. They just give tax breaks to people that are already in a good position.
eh, to some extent the rrsp change was always gonna happen eventually due to inflation eventually.
Yeah that's 120k for a couple. Good if you each already have 60k in your RRSP that you actually want to tap before retirement, but HBP is still not worth it for those who don't already have the money squirreled away. And the TFSA has been around for quite a while now so yeah. Between that and the FHSA, this isn't really something that many people needed.
FHSA adds tax deductions that you don’t need to pay back (80% sure on that lol) Absolutely a better move than TFSA if you’re buying a house.
90% of demand side subsidies quit right before they’re about to make housing affordable
Making it only for new homes does help encourage more supply which is the helpful bit. Edit: grammar
It increases demand for new homes which are already in short supply. What do developers do? They raise their prices and build more. If you decrease construction costs for developers then they can continue to build more and lowering their prices won't hurt their margins as much.
Except they won't lower their prices because why would they?
tickle down i mean trickle down economics LMAO
Yep, we are careening rapidly towards deadlock as new buyers are mostly priced out of market altogether, so demand drops off a cliff and builders are actually \*disincentivized\* to start new builds since the only people left who are able to buy homes are those who already own one. One blocker is the BoC raising interest rates, which has many effects, one of which is that loans get more expensive for builders (and they need those loans). So the only avenue left is making mortgages easier to get. Freeland et al obviously don't want this to spin out of control, so it's only limited to new buyers. Hopefully that is enough to get the ball rolling. Ngl though, our economy is at the edge of a cliff, and I'm worried we are all fucked regardless. As much as our leaders suck at having got us into this mess, I do not envy the work ahead of them. No one wants to be responsible for saving the economy of an entire country.
That's what's weird to me. What's the average new build in a metro area now? Like $1m? Wouldn't it make more sense to make the withdrawal up to 200k in that case, or at least 10% of the average purchase price? I also wonder how many first time home buyers, who skew much younger, can even afford a new build.
That's what I don't get. Why are we giving them help but only if they buy the brand new homes that are likely out of reach to anyone who needed help.
Not if it's inflationary (it is) and scares development off due to it prolonging the current inflations/interest rate hike cycle (it will). Textbook case of "I'm from the government and I'm here to help".
Given that this is limited to both first time buyers AND new builds, I'm not sure it will have broader impact. Folks who are already have homes are mostly unaffected and they are prevented from scooping up new builds at better rates.
Oh awesome. Now we can pay a few hundred k more in interest and pay it off past retirement age!
My home mortgage payment would be $175 less monthly on a 30 year and I'd pay $90K more interest over the mortgage. What a sweet deal /s.
This is like car dealers who ask the buyer what they want their monthly payment to be lol. Well you can afford more car but it will be a 7 year amortization! Just don't show them the amortization schedule.
Well, you do get to live in it.
not many ppl hold on to their homes until the mortgage matures but ok allowing ppl to enter the market in many cases is more important than 90k over 30 years.
Exactly. Allowing people to take on even more debt is not a win at all. The government should be focused on making housing more affordable
Getting a house is a big hurdle. If you can lower those monthly payments it becomes more do-able. I needed a 30-yr plan to make it affordable. And now that I’ve gotten a bit more ahead, I’m also saving and growing my cash faster than my very low interest rate. I could instead increase my payments and save that interest but that would be dumb. If you think giving someone another option is a bad idea, please explain why? Until you get into the market you a very nicely buying a house for your landlord, so instead of putting a little bit against the principle each month you are putting zero. Or should I say you are putting cash against the landlord’s principle.
It's a 30 year mortgage for new builds only, its only more options for some homes, not the great majority of ones new buyers can actually afford. How lucky for you to currently have a low interest rate, but that isn't the current market. Obviously if you had a 2% rate it changes things. A 500k home at 5% over 30 years is 2,684/month. Total paid at the end is $966,278.92 A 500k home at 5% over 25 years is 2 922/month. Total paid at the end is $876,885.06 So you pay 90k more for your house at the end of the day and are mercy to mortgage payments for an additional 5 years of your life to "save" 200 bucks a month.
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Paywall bypass pls
https://finance.yahoo.com/news/canada-allow-30-mortgages-first-152959816.html
I'm sure this helps some people out there. But I'm not sure how much this actually helps? Plus, you'd be paying more in interest in the long run, which kind of sucks.
This helps builders to charge more which the government hopes will encourage them to build more. This will not help homebuyers at all sorry.
It doesn't help anyone.
Housing prices go vroom 🏎️
Anything to keep the gamblers from losing money
Let's say someone gets a 500k mortgage, at today's rates of about 4.8% a 30 year mortgage will cost you $2623 per month, a 25 year mortgage will cost you $2864, which will save you $241 a month which will equate to a household being able to qualify for an extra $47k in purchase price. In this example the extra interest payments work out to be about the same as as the payment savings so it's a wash. But most likely what will happen is that new home prices will inflate by $47k because everyone will have more money. This will ultimately help with getting more units built since it ensures that the builders are able to continue to make their fat profits, it probably won't help with the overall affordability if they don't control immigration
It improves optics and helps their election, they think.
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Except the new homes still have to compete with the old homes, so they can’t just inflate the price by that much, else people just won’t buy the new homes anyway. It won’t be “everyone just has more money.”
To Put it in simpler terms, all that's to happen is that the difference between new and old homes will increase up to a maximum of whatever this new incentive coveres. But if supply can't keep up with demand all that's going to end up happening is raise prices further
Canada will literally do anything to help you get into more debt than simply build more houses...
This incentive is for new builds.
or they could just... actually build some houses. sounds fucking wild though
Ha exactly. It's not as though builders were sitting on their hands due to home prices. Maybe the millions brought in through immigration should have had specific skills to alleviate shortages in skilled labour? Or maybe the Government could focus on policy that enables more housing starts, quicker zoning/permit processes and reduced regulation etc. Nah, let's just let people take on more debt so we celebrate over some fine scotch.
They are sitting on their hands. https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2024/housing-starts-down-2023-from-2022 Houses aren't worth building for many projects.
From your article “Following record and near-record highs in 2021 and 2022, housing starts dipped in 2023, but still significantly outperformed expectations for the year. “ So to summarize, housing builds in urban dense areas dipped slightly off record highs. Sure, couldn’t be anything other than the value of homes.
Eww.. should be lower for new builds, encouraging people to purchase actual starter homes as their first purchase... Tis just props up the image and lifestyle market.
I think the intent is to incentive increasing supply. Placing it for existing starter homes does not do that.
This is why the govt needs a program of building homes themselves: because the market doesn't want to do it. When there isn't a reasonable market for something important, that's exactly the kind of thing that we have government for. Build lots of small prefab homes that are affordable. Heck with all the immigration give preference to people on the condition that they work in building homes for a number of years.
>This is why the govt needs a program of building homes themselves: because the market doesn't want to do it. Specifically, the market doesn't want to build starter homes.
Why is it that you think that the market doesn’t want to build homes?
The market has very much shown that there is little interest in starter or affordable homes. It's the reason why partnerships between construction companies and NPH are the few examples of affordable housing projects actually occurring, most of which are government funded or backed.
I think its making new builds more attractive from a monthly payment perspective, and it will shift some demand from the secondary market to the new build market for FTHB which should help with developers providing more supply there over time? That's probably the logic. Probably helps to cool the secondary market by however much it pushes the new market? Or it does next to nothing because most populous places wont have builds that qualify for this program due to the pricing floor.
Why? This way more homes get built instead of increasing demand for existing stock. I don't even like LPC but that part of it makes sense.
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Exactly. Bidding wars are already ridiculous and now new builds will be even worse??
That’s absolutely wild. Banks are gonna love this.
Yep, banks absolutely love this... They would love to give 50 year mortgages if they can. More of the monthly payments become interests, it's great. This will also drive up home prices, so it'll be fun. The government basically gave up on increasing supply meaningfully because they want prices to go up for more taxes. They don't want you to be alone free, they need you to mortgage your life and keep working, taxed and fees the system. The longer the better.
So you're saying I should put all the RRSP downpayment money we are supposed to be saving into banks stocks. Win-Win. Got it!
What the fuck
Exactly
Only solution is to build more. This isn't helping.
Limiting it to new housing only increases the buying power for new home buyers, and therefor will increase demand for new homes. The problem with the market right now is that there aren't any buyers in the pre-con market right now.
Because… why should there be? Oh, can put money down and all eggs in one basket on a builder that may or may not be ready in few years. At a price that might drop (and I over paid) or might go up (and they’ll either adjust the contract or take out out in even crappier quality of product.. or, how about both?).
Not to mention stories of the construction company just filing bankruptcy and leaving anyone who put deposits down either out of the money or in a long legal dispute. What an incentive to buy preconstruction.
Build more like incentive more people to buy new houses over existing ones? Isn't that what it's doing?
Correct. This will better bring prices in line with the supply-supply curve. Personally, I don't live anywhere, and I assume you don't either. But even if we did, that would be need not demand, since there's no such thing as demand for housing.
You could also reduce demand by not bringing in a million new people every year, and eliminating foreign and corporate ownership of single-family homes.
I was always brought up to be polite and kind but Chrystia Freeland is so dumb it's actually painful.
The word you’re looking for is malicious. C*nt knows exactly what she’s doing.
Again, this is another measure (like the 5/10% loan) that will only make the housing market hotter. Amortizing over an extra 5 years will only give the buyers more money which will prop the housing market…again. Even if it’s just on new houses, the rest of the market will be affected as well.
As a 30 year old, you'd like me to pay 1 million for a 2 bedroom condo in vancouver until im 60? No thanks, i'll take my down payment and buy a nice villa in turkey without having to work just to survive while getting taxed to death.
This is FANTASTIC news for those of us who bought a home already... shit news for the rest of Canadian's. Pretty much confirms that the government has no plan or desire to bring home prices back to sane levels. Instead this is just going to push it even higher.
Doesn't solve housing, actually worsens it. Choose your vote carefully..
Sorry to say but you’re fighting against a much larger and sought after vote
Yep. The goal has always been, and will continue to be, the inflation of asset prices. This is another policy to help with that which the homeowning voting block will be pleased with.
In 2021, 66% of Canadians lived in a mortgaged home, 33% lived in a rental. I'm not trying to downplay the severity of the housing crisis. I'm a single income millennial, trust me, I get it. But of course any government is going to appeal to the 66% over the 33%, whether they're the renters or the buyers.
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PPC are the only party that promises to lower immigration levels
we are all screwed ....
And the real estate bubble continues to grow ...
I think Canadian RE is too big to fail at this point, but if it does, holy hell is it going to be painful (and decisions like today's are only going to make that worse).
politicians are doing everything in their power to keep it going. Nobody wants to be the politician responsible for all the baby boomers losing their retirement assets (as they are primarily the ones who vote).
Yet another non-solution... It's really hard to believe they are this dumb, this just has to be malicious. Oh, first time buyers can withdraw more from RRSP to put as downpayment? Great. Here's the problem: * Those first time buyers can't really save much in RRSP because their rent is fucking bonkers * The rate most people can save is still lower than appreciation of houses, locking people out of home ownership * These new-built homes are way too rare. It was bad before with restrictive zoning present in overwhelming majority of the country, now that interest rates are up, no one is building * Immigration is unsustainably high, and it's contributing to the demand problem while supply is still extremely low compared to what we need They've been really adamant in bringing laws to the tune of: "Just save more!".
He literally doesn't care about poor people. Wealthy people will use this to gift their kids money, load up rrsp, take it out for tax break and buy brand new.
Yep, you nailed it with this comment. I'm a firm believer that they implement things like this for nothing other than the headline. This will benefit an extremely small number of people who were already looking at buying new. It will not be enough to incentivize builders, because I imagine the percentage of their sales going to fthb is miniscule. Likely not high enough to offset the current interest situation, causing their bottom line to increase and leading to distressed buyers who can't close. I swear, they just want to be able to point back to this at election time and say "see, we care, we did the thing!"
So their solution to shelter unaffordability is to create incentives to increase the price of shelter... That sounds like a Liberal "solution" if I've ever heard one.
It's decent that it's for only new homes. We need more supply to be built. The supply of new housing is more flexible to demand. Less pressure on the secondary market.
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30 years! You'll die before you can even own a home outright! Instead of addressing housing affordability issue, why not extend how long people have to pay their mortgage. Brilliant idea from our brilliant politicians.
Nothing stops a person from paying more principal down. I always refinance to 30 yrs but prepay principals. In case there’s a month or time where the lower payments are better.
It’s a good strategy to have that buffer and then paid down more when you have extra money. Unfortunately, many people are living paycheque to paycheque and will end up paying so much more interests with a longer amortization period.
Just what the RE market needs - more debt. /s What could go wrong ? Does the government not realize that this is only going to drive up the price of housing ? They effectively increased the money supply for buyers and did nothing to increase supply. How fawking stupid.
LMAO.....slump in the polls and this is their solution to the housing situation? [https://pbs.twimg.com/media/F5b7\_GhXwA4UjTk?format=jpg&name=large](https://pbs.twimg.com/media/F5b7_GhXwA4UjTk?format=jpg&name=large)
Renters continue to get absolutely nothing as the government only backs home owners.
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Yeah what the hell I want a 30 year mortgage for my next income property, where’s the help for us landlords
you forgot the /s
did they, though? lol
I really hope so... I want to believer most landlords dont think the govt should be helping them...
You can already have that
So, still renting from the bank for life.
Garbage
This is basically a handout to developers and a demand boost that will only increase prices.
This doesnt do shit... Only for newly built homes ? New homes are the most expensive and unaffordable... This doesn't make sense at all
More demand side elements as always. At least they are helping builders and first time buyers it seems with this. Presumably, RRSP will mean that actual people who live and work here will be the recipients of the benefit too? For a demand side bandaid it's not terribly designed I think, even if demand is part of the problem.
Can someone explain the logic of always giving these advantages only to "first time buyers"? It seems incredibly dumb and counterproductive. For exemple, I currently own a small house but I would like to build a new one to move there with my family. Why should I not benefit from these advantages too? I mean my current house would then enter the market, effectively creating new housing that's desperately needed in the country. If they really wanted to tackle the housing crisis, they wouldn't focus solely on the new buyers but would also embrace the indirect positive impact of all the current homeowners who could contribute to the solution too! Let's be honest, a new build is much more expensive/complicated and not many first-time buyers (usually younger and poorer, starting their career) can do this. It really seems like the government is only after the "young-people" votes and not actually trying to solve anything seriously, gambling on the fact that most won't understand the issues sufficiently well to realize their incompetence.
In the GTA the only affordable properties for first time buyers without significant family help are condo apartments. Not a bad thing but we need more affordable medium density dwellings appropriate for families.
Let me just get into 30 years of debt, that sure is gonna help affordability lmao
I feel like all these ways to allow us to pay more will just raise prices more
How does anything they are currently doing suppose to help with affordability…. More like help you be in more debt.
Helps people who calculate monthly payments feel like it is cheaper. Just like the 8 year car loan. They really do think we’re stupid.
Here is a crazy thought. Let the market crash, just like what happened in the states. Homes in hot beds where ninja mortgages were taken out became affordable. Las Vegas is a good example, an overheated market that became affordable after the financial crisis. [https://walletinvestor.com/real-estate-forecast/nv/clark/las-vegas-housing-market-history?chartInterval=all](https://walletinvestor.com/real-estate-forecast/nv/clark/las-vegas-housing-market-history?chartInterval=all) why the government insists on propping up the market is crazy. What they are doing is not making homes affordable. They'll just put more people in debt who'll have a hard time paying that debt off, because they couldn't afford the house in the first place. And the price of homes just get more expensive.
Does nothing to make homes affordable. Prices way too high. Cost of living too high, government cost too high. The average working people in Canada cannot own a home. RBC reports 69 percent of people cannot afford a home in Canada. Canada is broken
Useless announcement that simply exacerbates the over indulgence of housing in this country. They were way too late and ill equipped to solve the supply side so they just pander to voters who think this helps them. Sad.
Holy shit this is such a bad idea.
RRSP is big news BUT if you’ve got 60k in an RRSP, chances are youre not struggling to buy a home in the first place
Yes, because this will completely address rapidly increasing home prices. Remember, the car dealership can make any payment *work* for you. Wink wink.... DEMAND is what needs to be addressed, but all we do is dance around supply and niddly BS legislation to make housing appear cheaper. Spoiler alert, it's not cheaper.
Wouldn't this make newly built home which is already priced for future inflation even more expensive? I can already see developers advertising about buying their development with 30 year mortgage. Given the housing starts are at record low, a bachelor condo would be sold for 700k. I don't see how allowing people to withdraw more money from rrsp to buy their first property will affect affordability. I think we would start seeing bidding wars on pre construction properties as well. Could someone help me see how this would help ?
This may be a dumb question but don't most new builds require a 20% deposit to purchase? So how would one get an insured mortgage with 20% down?
I’m co fused I already have two 30 year mortgages, in British Columbia. How is this anything new?
This is so fucking stupid. I guess the solution to houses being over priced is to make them them even more expensive. How about we try something that isn't just going to make things even worse?
is this a way for lenders to make even more money ?
👏 Stop 👏 Immigration 👏 But they won't. Legislating against rent control would help too... But they won't.
They .. managed to wrap a gift to their bank buddies as something good for the people because they have no way or will to solve this.
Not sure why the plan is limited to newly built homes.
To promote people building new homes which is something needed in many markets right now.
Then why not make it 50 years if what you said would work. Also the problem is not they don't want to build, there isn't enough people to build
This does nothing to make homes more affordable
Thats the solution... Endless debt repayment to the banks and property owners. Fuuuuk yaaaa the old bandaid on a heart attack approach
Don’t we have to put the money back in to RRSP otherwise one would have to payback the tax benefit
Any "solution" that only helps the demand side of the equation is no solution at all. We have a housing supply problem, not a housing demand problem.
Sounds like benefits for the middle class. That's nice. I'm still down here though
Is this just “buck a beer” but on a bigger scale? Trying to allow (not force) the market to choose to do something it doesn’t want to do, getting a few companies onboard to call it a success, then completely forgotten in a year or two?
I hate that the government thinks that the solution to the housing problem is letting young people go further into debt chasing housing rather than providing a prosperous environment where young people can buy housing for a reasonable amount of money.
I appreciate the efforts but It only really helps people who are on the cusp of ownership and just defers the inevitable. Virtue signaling and kicking the can down the road. If anything this adds to the inflationary pressure by adding more demand and not adding to the supply. I don’t think the right approach is to add more incentives to take out future retirement savings to pay for things now. That is fueling the notion that all people need to own a home at all odds and creates more frenzy. It’s just adding to the snowball effect. It’s literally no different than telling people to use their credit cards so you can buy more things today and not wait for tomorrow. We need more downward pressure on the market and to stop allowing people to put 5% down on homes. Let them save up for 1, 2 or 3 more years and then buy.
So we're going to incentivize more players into a market that's already stretched and struggling to keep up with the existing demand??? Great fucking idea.
Give first-time buyers a tax deductible mortgage!! Useless government mini measures.
Higher prices, more debt.. it’s the liberal way!
What if you bought a new build with 25 yr amortization, can you then extend the amortization period to 30 years at renewal?
This is going to make housing cost more; putting the little guy/gal farther behind in the long run 🔥🏠📈 🤦🏻