How the federal budget will affect home buyers

The new federal budget was announced and it includes some changes that will affect home buyers across Canada.

By Homicity

Mar 20, 2019

How the federal budget will affect home buyers

The new federal budget, released on March 19th, includes some changes that will affect personal finances. And home buyers are one of the groups that will be impacted this year by the new policies.

The government’s goal is to make housing more affordable for Canadians, especially first-time home buyers since many have struggled to enter the market amid high-prices and new mortgage qualifying rules.

What changed under the new federal budget?

Several initiatives will impact the home buying process and let first-timers into the market. The new incentives provided by the government were created to support buyers and improve affordability.

The government is set to create a new program in September called the “First-Time Home Buyer Incentive.” The program is for eligible first-time home buyers with an insured mortgage. These buyers can apply to get financial aid from the Canada Mortgage and Housing Corporation (CMHC).

The CMHC will administer a fund to help home buyers lower their monthly mortgage payments. The program will provide qualifying buyers with an interest-free loan due once the property is sold and no ongoing payments would be required. The loan will cover 5% of the cost of an existing home or 10% of a newly built home. This incentive is also meant to encourage home construction in order to address housing supply shortages in Canada. It is expected that over 100,000 first-time home buyers will benefit over the incentive in the next three years.

But the program has requirements for buyers to be eligible as the government wants to ensure that participants can afford a home. Buyers must have a down payment of less than 20% with 5% being the minimum. The household income of candidates should be under $120,000, and the purchase price of a property can’t exceed four times the buyer’s household income. Purchases over $480,000 will be left out of the initiative.

Another change in the federal budget that will affect buyers is the increase in the withdrawal of your registered retirement savings plan (RRSP). Under the Home Buyer’s Plan, first-time home buyers were allowed to withdraw a maximum of $25,000 to aid their down payment. Now, the amount has been increased to $35,000, and new qualifying guidelines are in place. Previously, this program meant only for first-time home buyers, but if the buyer is in the midst of a broken marriage or common-law partnership, they can qualify for the withdrawal. These new changes will take effect immediately.

How will this affect first-time home buyers?

The federal budget will help Canadians get into the housing market. The new programs and incentives provide buyers with more options to finance their down payments and mortgages. However, the changes are not expected to make an impact in the market. The benchmark price for a property will remain the same, or it will be affected by other factors in the market.

Economists and real estate experts estimate that the new budget will affect mainly millennials in Canada, the new segment trying to enter the housing market. And for many, this is a change that offers some relief after the new mortgage stress test that started last year posed a challenge for mortgage-seeking buyers. In addition, buyers in volatile markets like Toronto and Vancouver can take advantage of the changes.  


Homicity helps you find your dream home in the perfect community. Whether you are buying, renting, or selling, you can navigate the Canadian real estate market with confidence with our expert advice, market news, and recommendations powered by AI.

Join the conversation

Please login to leave a comment

Don't have an account?

Sign Up

Articles selected for you:

Five things you need to know about the new mortgage stress test rules

On April 6, new mortgage stress test rules will come into effect.

Ottawa’s real estate market starts off slow in January 2020

Ottawa’s inventory shortage impacts the resale market with increased prices and decreased sales.

What to expect from proptech in 2020

Proptech is anticipated to disrupt the real estate industry in new and creative ways.

Condo sales lead the way in December 2019

The Ottawa real estate market closes out the decade with record-breaking numbers.