Given that assumption, let’s consider the proposals to help buyers save and borrow more money for a home purchase. (Just keep in mind that, as previously mentioned, such initiatives increase demand and end up pushing real estate prices even higher.)
The truth is, some of these measures are also unlikely to come to pass, or simply won’t make much of a difference to first-time buyers. For example, because real estate rules fall under provincial jurisdiction, it’s uncertain that the Liberals could move forward with a ban on blind bidding. Similarly, the proposed changes to the FTHBI, which hasn’t had much uptake in its current form, only removes the equity share element from the mix; it doesn’t improve affordability for first-time buyers beyond what already exists.
There are also concerns that a new First Home Savings Account (FHSA) would benefit only those who already have enough in RRSP savings to make full use of the Home Buyers’ Plan, or those with lots of TFSA savings (since they could immediately withdraw $40,000 to put into the FHSA and get a large tax deduction).
Having said all that, if you’re a first-time buyer, these initiatives could help you in three different ways:
1. You might qualify for a more expensive home
Homes priced at $1 million or more currently require a minimum 20% down payment ($200,000+) as they aren’t eligible for a CMHC-insured mortgage. Raising the insured mortgage cutoff to homes above $1 million, as both the Liberals and Conservatives propose, would allow some higher-income households to qualify for pricier homes even without a larger down payment.
Similarly, if the mortgage stress test was eliminated (although it’s not clear if the Conservative proposal would do away with the stress test entirely, or simply make it less strict), buyers would also be approved for larger mortgages and could therefore buy more expensive houses.
It’s important to note, however, that while you might be able to get into the market because you could then offer more competitive bids (that is, pay more for the same house), the homes you’re looking at won’t be any more affordable. All you’re doing is taking out a larger mortgage to finance your purchase, which means your carrying costs will go up accordingly.
2. You might lower your monthly carrying costs
If you bought a home within your current qualification limits and used the Liberal First Home Savings Account or NDP rental subsidy to put more money toward your down payment, you’d be borrowing less, so your monthly payments would go down. The Liberal plan to lower CMHC premiums by 25% could also reduce your monthly carrying costs slightly, as you’d no longer be adding the cost of the premium to your mortgage. The NDP plan to allow 30-year amortizations (up from the current 25-year maximum) would lower your monthly mortgage payments, but the trade-off is that you’d then pay your mortgage (and interest charges) for an extra five years—and the additional interest payments would add to the overall cost of your home.