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'First Home Savings Plan' - Update
October 20, 2023
4:51 am
RetirEd
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Alexandre: I strongly disagree. The amounts ARE significant, particularly in that they enable a larger down payment, which leverages a much larger house purchase.

And, as others have noted, they favour the wealthier and bid up property values.

RetirEd

October 20, 2023
6:59 am
Alexandre
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RetirEd said
Alexandre: I strongly disagree. The amounts ARE significant, particularly in that they enable a larger down payment, which leverages a much larger house purchase.
And, as others have noted, they favour the wealthier and bid up property values.  

To meaningfully inflate real estate values FHSA holders must:

1. All of them use FHSA for its intended purpose, and not for an extra RRSP contribution with future rollover to RRSP/RRIF;
2. Put aside tax rebates they get from contributing to FHSA and use these rebates against house purchase;
3. Wait for about five years, until they have meaningful amount of $$$ in FHSA and in tax rebates.

So, if these all true, in about 5 years from now real estate values might go up by about $30,000 per $1M+ house.
It is in the worst case, because existent home owners moving to a new house are excluded from that deal, so pool of house buyers with extra $30,000 from FHSA will be way less than 100%.

I think the true and unintended result from FHSA will be people increasing their RRSP contributions. Getting back $$ in tax refunds and spending them on themselves. So, it may be big screen TVs go up in price a bit, or cruises. Whatever one could get now for extra $2,500/year.
I don't expect real estate prices jump because of FHSA and, frankly, I don't expect house ownership will go up because of it.

In regard to "favor the wealthiest," that's somewhat populist statement. The more fairer statement would be "tax rebates favor those who pay more taxes" - but that would sound like Captain Obvious statement.

October 20, 2023
8:54 am
mordko
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It's a guessing game what “most” will do. What we do know is that the early uptake has been excellent. Kids know when they see a great deal.

Also, both my kids will use this to buy a house rather than for RRSP because they can count. Converting FHSA to an RRSP would give them the benefit of deferring taxation on the FHSA value. Using FHSA to buy a house would give them the benefit of zero lifetime taxation. Those who like throwing money away should definitely go the RRSP route.

Whether this will impact house prices and how is a much harder guessing game. This certainly is an added incentive to buy and does put more deposit money in buyers’ pockets much earlier but arguably its marginal given that capital gains in homes are already tax free and renting is becoming more and more challenging as various levels of governments are going after landlords.

October 21, 2023
8:25 am
Alexandre
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One more thing to consider.

RRSP contribution limit is calculated based on employment income.

It appears FHSA does not have that restriction. Which means, even if your income comes from sources other than employment, you can contribute to FHSA as a way to defer taxes on part of income (just like with RRSP).

October 31, 2023
5:35 am
kesa
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November 10, 2023
9:58 am
NorthernRaven
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FHSA accounts are apparently coming to Hubert (and Access CU as a whole?) on December 15.

Institutions currently offering FHSA include EQ Bank, TD (but not yet TDDI?), Scotiabank and iTrade, RBC, National Bank, CIBC, BMO, Questrade, Wealthsimple, Desjardins and Laurentian. As far as I know, neither Oaken nor Peoples have announced their FHSA intentions yet.

November 10, 2023
12:17 pm
TINAisOver
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NorthernRaven said
FHSA accounts are apparently coming to Hubert (and Access CU as a whole?) on December 15.

Institutions currently offering FHSA include EQ Bank, TD (but not yet TDDI?), Scotiabank and iTrade, RBC, National Bank, CIBC, BMO, Questrade, Wealthsimple, Desjardins and Laurentian. As far as I know, neither Oaken nor Peoples have announced their FHSA intentions yet.  

National bank does but NBDB , their brokerage, not yet. Plans to provide one "This Fall" .
https://nbdb.ca/accounts/open.html

Trader first, Saver second

November 10, 2023
3:06 pm
everhopeful
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NorthernRaven said
FHSA accounts are apparently coming to Hubert (and Access CU as a whole?) on December 15.

Thanks for the heads up... I want to set it up at NBDB because that is where some of my RRSP is at, and the FHSA will require a fee to transfer (like RRSP), but if they are not ready by mid-Dec, I will probably set it up and fund it at Hubert to make sure that the contribution can be claimed on next spring's tax return.

November 10, 2023
3:36 pm
NorthernRaven
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Due to somewhat odd circumstances, I'm actually considered a first-time homebuyer again, and I set up an FHSA 1-year GIC at EQ Bank earlier this year. EQ has no fee for balance transfers to another institution. I would expect Hubert to be similarly fee-free to transfer out (as they are for TFSA).

I'll probably put 2024's lump into Hubert, and transfer the EQ GIC when it matures. I'll want to avoid locking the FHSA money in even for a year fairly soon, so their quarterly term GIC would be handy, and still higher than the savings account.

November 10, 2023
5:24 pm
Nelson
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Steinbach Credit Union has a 4yr./5.50% FHSA GIC, any thoughts? I'm not too familiar with this financial institution but the rate is tempting.

November 10, 2023
7:16 pm
NorthernRaven
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Nelson said
Steinbach Credit Union has a 4yr./5.50% FHSA GIC, any thoughts? I'm not too familiar with this financial institution but the rate is tempting.  

Steinbach is (or was, Access CU has passed them with all the recent mergers) the largest of the Manitoba credit unions. It was the only big one that didn't also have a separate online-only deposit brand, and only has around 3 branches, in Steinbach and Winnipeg. They also seem to have been the first and only Manitoba CU that had FHSA accounts, although it looks like Hubert/Access at least is about to roll them out.

November 28, 2023
11:55 am
everhopeful
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Got an email the other day saying that NBDB FHSAs are now available.

November 28, 2023
12:32 pm
kesa
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will there be a Tangerine FHSA?

March 29, 2024
6:22 am
finance trance
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Curious is this account is broadly recommended even without house purchase plans in near or long-term, but rather as an account to be treated like an extra TFSA if you will?
Cheers!

March 29, 2024
8:07 am
everhopeful
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As long as you meet the eligibility requirements of the FHSA, you can treat it as extra RRSP room, because you are able to directly transfer FHSA funds to RRSP without affecting your RRSP contribution limits.

(I would have never designed the program like this, because I think this feature will entice many property owners to abuse it)

March 29, 2024
8:38 am
Alexandre
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everhopeful said
As long as you meet the eligibility requirements of the FHSA, you can treat it as extra RRSP room, because you are able to directly transfer FHSA funds to RRSP without affecting your RRSP contribution limits.

(I would have never designed the program like this, because I think this feature will entice many property owners to abuse it)  

Home owners are not eligible. I think you meant to say non-homeowners will use this program to expand their RRSP contribution room. That would be correct.

With annual contribution limit of $8,000 and marginal tax in excess of 30% (federal + provincial) a person who is eligible for FHSA would expect to receive an extra $2,400 or more from the CRA this year. This is nice chunk of extra money.

March 29, 2024
10:53 am
mordko
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finance trance said
Curious is this account is broadly recommended even without house purchase plans in near or long-term, but rather as an account to be treated like an extra TFSA if you will?
Cheers!  

In the very worst case its just like an RRSP. If at any point in the far away future you do decide to buy a property then FHSA is better than either an RRSP or a TFSA as it combines the tax benefits of both schemes. It effectively breaks basic logic of taxation by allowing you to not be taxed on either salary or investment. Not now, not ever. A valuable handout, definitely worth using up the room if you have it.

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