Deputy Prime Minister and Finance Minister Chrystia Freeland on Thursday announced a number of housing affordability measures to help homebuyers get their first home and current homeowners to buy a home. announced.
“I sincerely hope and believe that the concrete measures we are announcing today will provide a lot of comfort and hope to young Canadians,” she said in Toronto.
Freeland announced that starting April 16, the amount first-time homebuyers can withdraw from their RRSP for the down payment on their first home will increase from a maximum of $35,000 to $60,000.
“This, combined with the tax-free First Home Savings Account, will give young Canadians more tools to save for what they actually need,” she said.
The Tax-Free First Home Savings Account program allows Canadians to save up to $8,000 a year toward a home with a lifetime contribution limit of $40,000.
Donations to the account provide people with a tax refund. Account growth is not taxed, and you can withdraw funds tax-free for a down payment.
Extension of RRSP repayment period
Freeland also said it would more than double the amount of time Canadians can start repaying their RRSP contributions after making a withdrawal to make a down payment on a home.
He said first-time homebuyers who withdraw funds from their RRSPs between January 1, 2022 and December 31, 2025 will have a grace period of five years before repayments begin, instead of two. .
Freeland also announced changes to the amortization schedule for mortgage payments.
He said that starting Aug. 1, first-time home buyers with a mortgage guarantee when purchasing a new home will have 30 years to repay their mortgage, and that “more young Canadians will be looking to buy a new home.” “I can afford to pay my monthly mortgage.”
Changes to mortgage special provisions
Under the Canada Mortgage Charter, released in the fall, the federal government requires banks to contact homeowners four to six months before their mortgage renewal date to inform them of affordable options.
Freeland said Thursday that lenders must contact borrowers “up to 24 months in advance of a homeowner’s mortgage renewal” to discuss options.
The Mortgage Charter also requires lenders to provide temporary extensions to the amortization period to mortgage holders facing financial difficulties. Freeland said Thursday that the temporary measure will become permanent.
He said the amortization period could be made permanent “depending on the homeowner’s circumstances,” even for those whose mortgages are secured, and there would be no additional fees or penalties for the change. .
Other measures in the Mortgage Charter aimed at ‘vulnerable borrowers’ exposed to financial crisis, announced in the autumn, include:
- Waives fees and costs that would have been charged for mortgage relief.
- Exempts mortgage insureds from stress test re-qualification when changing lenders at mortgage renewal.
- Allows borrowers to make a lump sum payment to avoid negative amortization or sell their primary residence without prepayment penalties.
- Mortgage relief measures waive interest if the mortgage payment does not cover the interest payments on the loan.
PBO says Canada needs 1.3 million new housing units by 2030
Earlier Thursday, Parliament’s budget officer released a report saying 1.3 million more homes need to be built by 2030 to close Canada’s housing gap. A new report looks at how many more units are needed to bring Canada’s vacancy rate back to its historical average.
The Yves Giroux Office report also reveals how many more households would be formed if enough housing were available. Based on these benchmarks, the PBO estimates that Canada needs to build 181,000 more housing units per year than it currently does.
The report does not take into account recent federal efforts to shore up housing supply or Ottawa’s new cap on temporary residents.
The Canada Mortgage Corporation said Canada needs to build an additional 3.5 million homes by 2030 to return affordability to 2003-2004 levels.
Giroux said his estimate is much lower than CMHC’s because it is only concerned with bridging the gap between supply and demand.
The Liberal government has made a series of housing-related announcements ahead of the federal budget, with the main aim of increasing housing supply. Proposed measures include billions of dollars in low-cost loans to spur rental construction and infrastructure funding for states and local governments.