It looks like Christmas has come early, at least for some BC house hunters. The BC government has revealed plans to launch a new program for first-time buyers, and it’s expected to help as many as 42,000 households in the province enter the market.
Announced December 15th, the BC Home Owner Mortgage and Equity Partnership program will see the BC government match the amount of money first-time buyers put toward their down payment, to a maximum of $37,500. Loans will be interest free for five years, and recipients won’t have to start paying the money back during that time. Once five years have passed, they will be expected to begin making monthly payments at current interest rates.
“We believe every British Columbian deserves a place to call home,” Premier Christy Clark said in a press release. “We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering with first-time buyers to make the purchase of their first home more affordable.”
The news came the same day that the BC Real Estate Association released its latest data on residential real estate sales and prices. 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.
First-time buyers hoping to participate in the program will have to meet a number of requirements in order to be eligible. For starters, applicants must be planning to buy a home for $750,000 or less and have total annual household income of $150,000 or less; they must also be preapproved for a high-ratio insured mortgage. Other requirements include being a Canadian citizen or permanent resident for at least five years, and living in BC for at least one year.
Speaking to The Times Colonist, Tom Davidoff of UBC’s Sauder School of Economics said that making it easier for people to buy homes when the province’s ability to increase housing supply is limited may drive up home prices. “I just think it’s lousy economics,” he said. NDP housing critic David Eby also pointed out that if interest rates are higher in five years, those who participate in the program will be at an increased risk of defaulting on their mortgages.
The program will start accepting applications on January 16th, 2017, and the BC government plans to invest about $703 million in it over the next three years. As there is no cap on the initiative it could eventually be expanded.