Canada has recently faced a housing crisis, particularly in its major cities, where the cost of homes and living has skyrocketed. The 2023 Federal Budget, titled "A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future," released at the end of March, provides a range of plans to help Canadians during these trying times. Of these plans, the most notable for homebuyers and homeowners is the Tax-Free First Home Savings Account (FHSA) and Mortgage Protections.
One of the most significant plans for homebuyers is the introduction of the Tax-Free First Home Savings Account. The federal government committed to this plan in Budget 2022, and as of April 1, 2023, financial institutions can offer the account. This new registered plan allows first-time home buyers to save $40,000 on a tax-free basis. Similar to a Registered Retirement Savings Plan (RRSP), contributions will be tax-deductible, and withdrawals to purchase a first home, including from investment income, will be non-taxable, similar to a Tax-Free Savings Account (TFSA). Any financial institution that is able to issue RRSPs and TFSAs would be able to issue FHSAs, including Canadian trust companies, life insurance companies, banks and credit unions. Individuals with an account are allowed an $8,000 annual contribution limit and a $40,000 lifetime contribution limit.
An FHSA would be permitted to hold the same qualified investments that are allowed to be held in a TFSA. Taxpayers could hold various investments, including mutual funds, publicly traded securities, government and corporate bonds, and guaranteed investment certificates. Additionally, an individual could transfer funds from an FHSA to another FHSA, an RRSP, or an RRIF on a tax-free basis. This account aims to lift some burdens from prospective first-time homebuyers and incentivizes Canadians to save for a home.
In the last few years, Canadians have been impacted by the effects of inflation, seeing interest rates and mortgages soar. Another plan detailed in this year's Federal Budget is aimed at helping Canadian homebuyers with existing mortgages, particularly those with variable-rate mortgages. The Financial Consumer Agency of Canada will enforce a code of conduct to protect Canadians with existing mortgages, ensuring that federally regulated institutions provide Canadians with reasonable relief measures based on individual circumstances.
For example, a homeowner facing financial hardships due to "exceptional circumstances" can apply for mortgage relief plans by extending amortizations, adjusting payment schedules, or authorizing lump-sum payments. Existing mortgage regulations may also allow lenders to provide temporary mortgage amortization extensions, even past 25 years.
This code of conduct will ensure that Canadians are treated fairly and have equitable access to relief without facing unnecessary penalties, internal bank fees, or interest charges, which will help more Canadians during times of elevated interest rates.
Budget 2023 also announced the plan to develop a Home Buyer's Bill of Rights, which will help young, middle-class, and new Canadians by making the process of buying a home more open, transparent, and fair. The Home Buyers' Bill of Rights could include ensuring the legal right to a home inspection, requiring that real estate agents disclose whether they are representing both sides of a potential sale, and ensuring transparency on the history of sale prices. The government would further consult solutions to remove barriers for homebuyers from diverse communities looking for alternative financing products. This plan aims to help a wider scope of people from different backgrounds enter the housing market.
The Federal Budget will also be cracking down on what is considered predatory lending. This means introducing changes to the Criminal Code to lower the criminal rate of interest from 47 percent APR to 35 percent APR and to begin consultations on whether the criminal rate of interest should decrease. The government will look into adjusting the Criminal Code's payday lending exemption to require payday lenders to charge no more than $14 per $100 borrowed. This would allow low-income lenders a fair chance at paying back the money they borrowed without seeing gouged rates of interest. This affects not only homebuyers but those looking to finance a car or other commodities.
The 2023 Federal Budget touches on other strategies to help Canadians of all ages, from children to students, homebuyers, and seniors. In addition, the budget touches on Building More Affordable Housing, which includes reallocating funding from the National Housing Co-Investment Funds to other construction streams. This move would ensure more affordable housing for marginalized people, including racialized individuals, women, and children. The 2023 Federal Budget covers a wide range of solutions for Canadians to live a higher-quality life. Other plans in the budget include but are not limited to:
- A New Grocery Rebate For Canadians
- Cracking Down On Junk Fees
- Lowering The Cost Of Repairing Appliances And Devices
- Implementing A Standard Charging Port For Electronic Devices
- Automatic Tax Filing
- Provide $813.6 Million In 2023-24 To Enhance Student Financial Assistance For The School Year Starting August 1, 2023
- Investing In Public Health Care
- Investing In Dental Care For Canadians
- A Plan For Affordable Energy, Good Jobs And A Growing Economy
- Investing In Canadian Workers
- Investing In Reliable Transportations And Infrastructure
- Investing In Indigenous Priorities, Including Communities And Clean Air And Water
The government recognizes the hardships Canadians have faced during this inflation period and has provided strategies and policies to help the country. Overall the 2023 Federal Budget aims not only to reduce the cost of housing but also to strengthen the middle class and promote a healthy future for Canadians.
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