This mortgage agent breaks down federal parties' pledges

by Neil Sharma on 10 Sep 2021

The governing Liberal Party’s election promise to introduce a new tax-free home savings account that would function much like RSPs and TFSAs to help first-time buyers is a welcome pledge, says Christelle Mwamba, an agent with Mortgage Scout.

The savings account would be available to Canadians under 40 and allow them to bank $40,000 that could be put towards their down payment.

“The down payment is key right now—that’s what everybody’s struggling to save,” she said. “First-time buyers are usually millennials who want to move from the city to suburbia and buy a house. Especially with prices going up, at least now they have a tool on which they won’t be taxed. With prices rising, down payments are higher, so the more you put down, the lower your mortgage amount will be and you can pay it off faster.”

Additionally, the Liberals are doubling the First-Time Home Buyer Incentive to $10,000, which Mwamba believes will boost the hitherto little-used credit’s appeal.

One curious election promise the party made is increasing the cap on mortgage insurance from $1 million to $1.25 million because average prices in Canada’s key markets will likely surpass the latter amount by the time it’s implemented, says Mwamba.

“It’s a good thing because it gives first-time homebuyers more options to come up with less capital and enter the market,” she said, “however, by the time it’s implemented it might be too late because prices are still going up.”

The Conservatives pledged to curtail non-resident ownership of real estate by requiring foreign buyers to move to Canada if they’re going to own any property in the country. Mwamba says that could be short-sighted, though, because rental supply in major markets hasn’t kept apace with demand.

“Maybe tax them but we can’t stop foreigners from coming. People like me came to this country to get educated and after the first year of school you don’t want to live on campus. If your parents can buy you a condo and you can live there, that helps.”

Additionally, the Tories want to remove the B-20 stress test for borrowers who shop their mortgages around to other lenders, an amendment Mwamba welcomes because it will force lenders to offer more competitive rates. She believes that, at present, the stress test is precluding homebuyers, especially first-timers, from participating in the housing market.

The NDP has proposed increasing high-ratio mortgage amortizations to 30 years from 25, and that can help a lot of first-time buyers get over the hump, says Mwamba, who frequently sees situations in which buyers could use the added flexibility that an additional five years to amortize their mortgages would provide.

However, the party also wants to raise the capital gains tax and Mwamba says that’s a non-starter.

“Currently, when you sell your principal residence you don’t pay capital gains unless it is a rental property, so an increase in capital gains tax will affect Canadian and foreign real estate investors. I’m not in favour of that; it doesn’t make sense because if you stop people from selling their homes then you’re not allowing new buyers into the market and people get stuck on the housing ladder.”

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