Opinion: First-Time Buyer Program Disappoints, Surprising Almost No One

The First-Time Home Buyer Incentive can’t be considered a dud, yet. But it’s surely not impressing anyone.

What is the FTHBI? As the feds put it, “the government offers you financing [i.e., a 5-10% bigger down payment] without interest. This helps reduce your monthly mortgage payment without increasing your down payment.”

One of its champions, CMHC CEO Evan Siddall, said only 2,000 applications have been approved for the program since it launched on September 2, 2019, reports CMT. That means it’s running at 50% capacity, he estimates.

Meanwhile, one of the private insurers tells us only 3-4% of their default-insured mortgage applicants are even asking for it. That’s despite polls suggesting 86% of young buyers think it’s “useful.” So much for polls.

Siddall admits there’s been lower than anticipated uptake. But it depends on who was doing the anticipating.

If you ask mortgage brokers, they anticipated exactly how this program would perform. All they had to do was run basic qualification calculations to confirm the FTHBI helped hardly anyone qualify for a mortgage. Most people qualify for a bigger mortgage without it.

CMHC President and CEO Evan Siddall

That’s why almost no one is promoting this thing—because people don’t see the upside (even though it does save some people money).

For one thing, its buying power is restrictive (as mentioned). For another, mortgage advisors can’t easily calculate its net economic benefit for clients. The government’s biggest failing—besides launching the program in the first place—was not building a simple scenario calculator that shows how much further ahead or behind you’d be in the FTHBI, based on basic assumptions. They came close, but they should have boiled their calculator down to one number, like Manulife does with its “One” Calculator.

As for most lenders, they resent the FTHBI. It’s created expense and hassle for them with little return on investment, given few want it. And many taxpayers wouldn’t be thrilled to know the government’s giving away their money to homebuyers either.

Siddall tried to explain the program’s poor performance by suggesting first-time buyers may not be struggling enough with affordability. On Monday, he told Mortgage Professionals Canada’s annual conference audience, “It may be that the reason we’re at half capacity is because there’s not as grand a problem [as] everybody says there is.”

Maybe that’s because the smart guys in Ottawa designed a program for the wrong problem.

Sidebar: CMHC will post FTHBI usage here on a quarterly basis. The next update should be available as of “late January early February,” CMHC’s always helpful communications folks tell us.