Canada's Housing Minister Sean Fraser announced on Thursday that the federal government is increasing the withdrawal limit for Canadians pulling money from their RRSP to put toward a new home under the First Home Buyers' Plan. It’s part of a handful of changes he announced, including changes to the amortization on mortgages for first-time homebuyers.
In a note to clients released Friday morning, BMO senior economist Robert Kavcic said the shift would improve a household’s buying power in these transactions by about eight per cent, given the standard five-year fixed-rate mortgage.But Kavcic also said the actual impact of the policy shift would only hit a “small segment” of the market.
Kavcic said the policy could shift buyer demand towards new builds for a time, “but the overall market impact should be limited.”“And that’s a good thing, as juicing demand is rarely the right prescription for a market already struggling with excess demand,” Kavcic wrote.The Liberals’ policy shift was hailed by the Canadian Home Builders’ Association on Thursday, which had been calling for such a move to stimulate building in the sector.
In addition to the amortization changes, Freeland announced new rules for first-time buyers making withdrawals from their registered retirement savings plans via the Home Buyers’ Plan. As of April 16, buyers will be able to take out up to $60,000, an increase from $35,000 previously, towards the purchase of their first home, and will have a total of five years, up from two, until they have to start repaying the withdrawal into their RRSP.Overworked and underappreciated: Teachers urge action, lament ‘challenges’ in recruiting colleagues amid shortage
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