Published: Sun, December 18, 2016
Economy | By Melissa Porter

BC offers interest-free loans up to $37500 to first-time homebuyers

That means any B.C. household hoping to take advantage of the new loan program with a plan to pay it back in the first five years, before interest payments kick in, will need to set aside another $625 every month on top of the various other costs involved with owning a home.

Eby said the government's move appears to reward real estate developers who are major financial contributors to B.C.'s Liberal party. While it shows that in November the average MLS price for a home in the province fell 6.4 per cent year-over-year to reach $625,871, that's still out of reach for many first-time buyers.

"You start with mortgage that has interest rate locked in for a few years, then you add in the government's 0 per cent rate for the first five years, you have something you can afford in the short term", he said. "This partnership can help lower their monthly costs in the first five years, and help make home ownership more affordable".

"Our analysis tells us that it won't because everybody who is going to be eligible for this program will have to have been accepted for a mortgage already".

The government provided an example of the loan program on a $750,000 home where the buyer has saved $52,500 for a down payment.

The home must be the home buyer's principal residence, it's capped at homes up to $750,000, and your total family income can be no more than $150,000 a year.

"The fact is it does help first-time homebuyers and relieves the pressure on the bank of mom and dad", said Neil Moody, CEO of the Canadian Home Builders Association of B.C.

New Democrat housing critic David Eby said first-time homebuyers would be saddled with more debt when the government should be building affordable housing on provincial land. "They didn't want the nutso boom. There was some chance of a hard landing by the real estate market, and I think that puts this off".

"The province has huge parcels of publicly owned land that they could do wonderful developments on, to build housing that's actually affordable, so they don't have to take on more debt", said Eby.

"If many first-time buyers cannot enter the housing market, the long-term housing continuum is at risk", said Neil Moody, chief executive officer of the CHBA BC.

The government loan program is the latest housing announcement from Clark's Liberal government, as it seeks re-election in May. "The amount of money the program is offering, I think it is significant", he said. But it could bring within reach an apartment in the city or in nearby Burnaby or New Westminster, or a small house further out in the Metro Vancouver suburbs.

High levels of household debt have left the country vulnerable to economic shocks, the Bank of Canada said this week, yet the provincial mortgage-assistance plan would enable households to accumulate more debt.

Taxpayers could also be left on the hook if the loans go bad.

"If I were to construct this, I'd be much more focused and more targeted on those people most in need", he said. "I'd be helping them first with government money".

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