Ontario’s Peel Region halts homebuyer’s loan

The Peel Region in Ontario is ceasing its plans to implement an interest- free loan for first-time buyers which are almost like the one British Columbia is embarking on.  The province will instead use the finance to supply more affordable houses in the market as the demand level is on the increase.

British Columbia Premier Christy Clark last week disclosed that her government will introduced an interest-free loan for first-time buyers as a way to aid them participate in the housing market. The high housing prices had for so long excluded first-time buyers as mortgage rules became tighter and market prices were impossible to reach.

For first-time buyers deciding to buy a home worth $750,000, the loan offered by the government will be equivalent to $37,500 which is interest free for five years, which is if they qualify for the loan.

But for many critics, this move by the government will only increase the debt ratio of people as high housing prices which is expected to continue in 2017 will lead people to borrow more.

The loan project was however helpful in Peel according to the regional government as 681 households became owners in the past eight years. Owners do not get to repay the loan if they reside in the property for the next twenty years.

But unfortunately, the project ran out of fund as there was a growing demand from buyers.

And as home prices increase last year, it became very difficult to maintain hence the project will be halted at the end of this month. The government will however embark on supplying more social housing for renters.

Beth Storti, the manager in charge of Peel Region’s loan program noted that the program will work out better in British Columbia as the province has a more dashing available fund at their disposal but they should learn from what took place in Ontario.

She went on to suggest that first-time buyers should be made aware of what they are embarking on and the responsibility they will have and also the risk of borrowing in a high priced market.

Some economists from the University of British Columbia and Simon Fraser University were also not in favor of the loan as they claim that it influences first-time buyers to stop at nothing in achieving their dreams of buying a home.

But the Premier still insist that first-time buyers have little influence in rising housing prices further.

An expert on community housing, David Hulchanski also stated that the loan is just one of the many strategies used by politicians to win over supporters and this strategy has been use in the past and added that it makes no sense to help people that are already on the verge of owning a home.