The 2019 federal budget was unveiled March 19th by Finance Minister Bill Morneau. Key elements included housing affordability measures for first time home buyers, post- secondary student financing and debt repayment, professional development training opportunities, and securing your retirement. Keep in mind this is a pre-election budget and there are elements sprinkled in it for everyone. Funding for many of the commitments will only start to kick in after October’s election, giving voters the chance to weigh in their thoughts at the ballot box.
Millennials looking to enter the housing market would benefit from these proposals as ease of entry into the market will be improved by proposed incentives, and they will also benefit due to a reduction in debt service costs related to Canada Student Loans. We do not foresee drastic changes to the Canadian economy based on measures unveiled in the budget, however the incentives aimed at first-time home buyers have the potential to continue to prop up the Canadian housing market.
Critics mentioned that the document did not outline measures to address corporate competitiveness or any plans to get back to a balanced budget.
We have detailed some of the items below that you may be impacted by.
First-Time Home Buyers
A new program called the First-Time Home Buyer Incentive will be introduced and administered by the Canada Mortgage and Housing Corp (CMHC). Under this program CMHC will provide five percent of the cost of an existing home and 10 percent of a new home through what is essentially an interest-free loan that doesn’t need to be paid back until the property is sold in the future.
A second step taken for first time home buyers is to increase the maximum tax-free withdrawal from an RRSP to $35,000 from $25,000 effective immediately under the Federal Home Buyers’ Plan (HBP). People will also be able to use HBP if they experience a common-law partnership or marriage breakdown even if they don’t meet the usual first-time buyer requirement.
The budget makes the cost to service a Canada Student Loan or a Canada Apprentice Loan more affordable. The rate on the popular floating rate loan has been discounted from prime plus 2.5 percentage points to just prime. The government estimates total savings of $2,000 for the average borrower as a result of these measures.
Canada Training Credit
In order to encourage Canadians to enhance their skills needed to succeed in the marketplace, the budget has proposed the Canada Training Credit to address barriers to professional development. Eligible individuals between ages 25 and 64 can accumulate $250 each year to a lifetime limit of $5,000 which can be used to cover up to half of eligible tuition and fees associated with training.
Retirees & Seniors
People who are receiving a monthly guaranteed income supplement are now able to earn slightly more through part-time employment without having some of their benefits clawed back. The budget has also introduced measures to auto-enroll those age 70 and up that contributed to CPP and have not yet applied. The budget also clears the way for creation of advanced life deferred annuities that kick in at the end of the year you turn 85 for those who fear they may outlive their savings.