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At a time when Canadian millennials are facing financial roadblocks in achieving the dream of owning their own home, the federal government is stepping in to help.  

The Liberal’s 2019 federal budget has introduced incentives meant to help first-time buyers, particularly those in their 20s and 30s, have access to more funds to foot a down payment. Part of the plan involves increasing retirement fund borrowing to cover a portion of their mortgage.  Now, first-time home buyers are permitted to withdraw $35,000 from their RRSP, up from $25,000.

In addition, buyers whose household income is less than $120,000 will also be eligible to finance a portion of their home purchase through a shared equity mortgage, or zero-interest loan with Canada Mortgage and Housing Corporation.

While this sounds like a great incentive to get the home-buying process moving, there are some obvious drawbacks.  For example, unless they have a super high-paying job and have saved $35,000 to a retirement plan at the age of 30, then more than likely, most millennials won’t have the government allotted amount to tap into anyway.  Further, they are required to pay the amount borrowed back within 15 years.

The federal budget will also offer home buyers a 10 percent shared equity mortgage for the purchase of a newly constructed home, and 5 percent for an existing home.  Ultimately, this means the government will have either a 5 or 10 percent stake in the home, which would need to be paid back when the home is sold. Although the specific details of the program are still under review, they are expected to be revealed later in the year.

Whether these changes will make a difference, only time will reveal.  In my personal opinion, the greatest impact the government could have on the housing market isn’t changing borrowing rules, but rather addressing the larger problem – supply – and building more affordable housing to keep up with the demand of the Toronto buying market.