The British Columbia government, by the end of 2016, announced it would aid first-time home buyers with a five year interest-free loan which will enable them to enter the housing market. this came as good news for many buyers as it served as an opportunity for them to once again revive their hopes of buying their dream home.
But the loan program did not go down well with many real estate experts as they claim the loan will only spike up home prices as the demand for homes will be increase by a larger number of buyers entering the market. Even though at the time, this claim seemed a bit out of place, however, reality is about to hit as new reports shows the British Columbia’s homeowner loan is not as cheap as the government had made it look. According to Professor Tom Davidoff, the loan program will most likely spike up the cost of entry-level homes and will likely increase on the possibility of a housing decline.
Furthermore, the Home program estimated by the Ministry of Finance shows for every dollar of loan obtained under Home, taxpayers will lose about 19% in administrative costs and also lose interest. This estimate eliminates the possible cost of buyers being unable to repay their loans.
In response, the provincial government stated the possibility of buyers being unable to repay their loan is not worthwhile as buyers at the initial stage of the program must be able to quality for a mortgage loan which is done under tight regulations.
Furthermore, the province argued that the government stands to gain nothing if buyers do not repay their debt as the loans are second liens.