There are many types of useful savings accounts out there, but not every one has their exact purpose right there in the name, like the First Home Savings Account (FHSA).
BMO’s 15th annual Investment Survey reveals 56% of potential first-time homebuyers are planning to use the FHSA to help purchase their first home, slightly up from 52% from 2023. And, with young homebuyers often turning to the Bank of Mom and Dad for help, 23% of parents are expected to use the FHSA to help their children save for a home.
"It is encouraging to see that over half of prospective buyers plan to use the FHSA to save, Nicole Ow, BMO’s vice-president and head of retail investments, said in a statement.
“And we want to see that number grow because the FHSA is such a powerful tool. Benefits including the ability to make tax-deductible contributions, tax-free growth of the investments and the ability to hold various investment types make this plan the most advantageous way to save for a home. It is like an RRSP and TFSA rolled into one for first-time homebuyers."
"For most, buying their first home will be part of a multi-year plan, involving several savings vehicles like the FHSA, RRSP withdrawals through the Home Buyers Plan, and may also involve multiple generations, with parents and grandparents contributing financially."
Millennial parents are the most likely to help their children via an FHSA at 42%, compared to 21% of Gen Z parents and 7% of Boomer parents.
FHSA as a tool for home buying
FHSA contributions are tax-deductible, earnings are tax-sheltered, and withdrawals are tax-free when used towards qualified first-time home purchases. First time home buyers can contribute up to $8,000 a year and that yearly contribution limit can be carried forward, with a lifetime contribution limit of $40,000.
The FHSA knowledge gap is narrowing, with two fifths (40%) of Canadians indicating they have at least some knowledge of the account, up from 31% from last year.
As well, nearly half (48%) of Gen Z are knowledgeable about the FHSA’s features and benefits – the highest among any age group.
Impact of relaxed mortgage rules
First-time homebuyers were also asked how the new relaxed mortgage rules would influence their ability to purchase a home. Over a third (36%) responded that they expect the new rules will make it easier to make a purchase. The new rules allow for amortizations of up to 30 years for first-time homebuyers and on any new construction purchase, as well as an increase in the maximum amount for an insured mortgage rising to $1.5 million from $1 million.
Even though mortgage rates have generally fallen over the past year, just 36% of prospective homebuyers believe the changes in mortgage rates will make it more likely that they will purchase a home in the next two years. And 39% have concerns that changes in mortgage rates will make it less likely they will be able to purchase a home.
Survey methodology
This study was conducted by Pollara with an online sample of 1,500 adult Canadians aged 18 years and above from November 8 to 18.
This article More Canadians are taking advantage of FHSA — over 50% planning to use it to help purchase their first home originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
