B.C. 1st-time homebuyers loan might not make a difference, mortgage broker says

As applications for the first-time homebuyers grant open on Jan.16, a mortgage broker questions how the program will be implemented and whether it will make a difference.

Questions remain on how lenders will implement loan; applications open Jan. 16

The B.C. government announced a new loan program for first-time homebuyers on Dec. 15. (Darren Calabrese/Canadian Press)

A mortgage broker says British Columbia's new first-time homebuyers loan program might not have as much of an impact as some hope.

The B.C. government recently announced it would offer loans up to $37,500, or five per cent, of the home's purchase price for first-time homebuyers to cover the cost of a down payment.

The loans are interest-free and payment-free for the first five years; applications for the program open up Jan. 16.

Reza Sabour, an active mortgage broker and director with the Canadian Mortgage Brokers Association of B.C., told CBC's The Early Edition questions remain on how the loan will be implemented.

"The biggest question right now is whether the lenders are going to start factoring in a payment starting today, even though you're not making a payment for five years," he said.

Other loans like car loans or credit card debt are factored in immediately, he explained, and if payments are factored in immediately for the loan program it might take away from any kind of gains the program promises.

Federal stress test

In addition, the federal government introduced rules in October to put a stress test on new mortgages

The rules were introduced to make sure their mortgages could withstand a potential increase in interest rates. They apply to any insured mortgage for a buyer putting down a less than 20 per cent down payment.

Sabour said the new mortgage rules have largely impacted first-time homebuyers.

"The stress-testing itself has reduced most people's first-time home purchase price by about 20 per cent anyway," Sabour said.

B.C.'s new loan program might not be able to counter this drop, he said.

"It was good on the government to do something to address the fact that first time homebuyers have been in the crosshairs lately in a lot of these mortgage rules," he said.

"Whether or not it's going to make as big of a difference as they hoped, that remains to be seen."

With files from The Early Edition

To listen to the interview, click on the link labelled A mortgage broker reviews province's new first-time homebuyers loan