Home Buyers Plan – Making Home Ownership a Possibility

Posted: February 22, 2012 in Buyers, General Information
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The Home Buyers’ Plan (HBP) RRSP withdrawal limit needs to keep pace with inflation to stop the steady erosion of its purchasing power and protect its value for first-time home buyers. While this was recognized in Budget 2009, which increased the plan’s withdrawal limit from $20,000 to $25,000, inflation has begun to erode the plan’s buying power again. In order to preserve the plan’s value for tomorrow’s first-time home buyers, it needs to be indexed to inflation.

Indexing the HBP to the CPI in $2,500 increments would delay implementation until after balanced budget targets have been met. Indeed, there is no cost until 2015, at which point the cost would be minimal.

The HBP has made homeownership a more affordable reality for over two million Canadians. It allows Canadian families to save concurrently for retirement and a home, eliminating the need to choose one over the other or greatly dilute both goals. It is an essential and unique tool in a home buyer’s toolkit.

The HBP provides a gateway to financial security through homeownership. In fact, average household net worth was found to be $11,000 for those who rent compared to $375,000 for homeowners with mortgages and $764,000 for mortgage-free homeowners.

Furthermore, the HBP effectively serves as a repayable zero-interest self-loan, which can reduce or eliminate the need for costly mortgage insurance and reduce the amount of interest paid to lenders.

According to Altus Group, each MLS® home sale and purchase generates an average of $42,350 in ancillary spending. This includes renovations, furniture and appliances, professional services, moving costs, and tax revenue to government.

In 2009, more than 50,000 homes were purchased using the HBP, resulting in over $2.1 billion in spin-off spending and over 17,500 jobs.

A number of programs are indexed to ensure they do not lose their intended value, including retirement benefits, Registered Retirement Savings Plans, and Tax Free Savings Accounts.

Tax Free Savings Accounts are indexed to the Consumer Price Index and rounded to the nearest $500. The HBP should be indexed in a similar way.

Using Budget 2009 as a starting point, indexing the HBP in $2,500 increments would enable the government to meet its deficit reduction targets and other planning objectives. This approach would cost nothing until 2015, at which time the plan would adjust by $2,500 at a cost of $7.5 million. A further $2,500 increase would occur in 2020 at an additional cost of $7.5 million. This costing is based on estimates contained in Budget 2009 and 2010.


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