2015 Federal Budget: 7 Key Points Surrounding the Housing Sector
On April 21, Finance Minister Joe Oliver released his first Federal Budget. Amidst falling oil prices across the globe, the state of the Canadian dollar and the upcoming federal election, Oliver provided clarity surrounding the budget coinciding with the public’s best interest, as well as those of political parties vying for seats. Oliver announced a balanced budget which he accomplished with $2 billion taken from the government’s traditional contingency fund. The surplus of $1.4 billion, a number significantly lower than the projection made six years ago, and a half billion lower than a forecast made last November, can be credited to the sales of assets which were set aside in the event that the nation encountered unexpected pitfalls.
Among highlighting the expected growth of the Canadian economy this year, TFSA annual limit raised from $5,500 to $10,000, and tax cuts for small business over the next 4 years, Oliver also touched on key points affecting the Canadian housing sector.
- In Economic Action Plan 2015, a proposal to exempt capital gains of private shares or real estate sales if profits are donated to a registered charity will give a welcomed break to both individuals and corporations. The exemption will be granted if the donation is made within 30 days of the sale and would only affect the portion of the proceeds donated, as opposed to all gains. The exemption will be go into effect after 2016 to allow Canadians to provide more charitable gifts.
- In a collaborative effort with mortgage lenders in Canada, the Federal Government aims to increase the public awareness of mortgage prepayment penalty fees. This initiative is meant to help protect consumers by enforcing the distribution of enhanced data surrounding mortgage prepayment and ensuring lenders disclose clear information to borrowers. This works in line with expanding the Voluntary Mortgage Prepayment Disclosure Commitment.
- The Government will continue to ensure the housing finance framework reduces taxpayer exposure and supports the long-term stability of the housing market and financial system. The recent improvements to the housing finance framework will help restrain the growth of taxpayer-backed mortgage insurance and securitization and enhance stability. These include increasing fees on National Housing Act Mortgage-Backed Securities and Canada Mortgage Bonds, and capping annual issuance on new guarantees under these programs.
- The Government will implement regulatory measures that limit the extension of portfolio insurance through the substitution of mortgages in insured pools, tie the use of portfolio insurance to CMHC securitization vehicles, and prohibit the use of government-backed insured mortgages as collateral in securitization vehicles that are not sponsored by CMHC.
- The Government continues to closely monitor the housing market and assess measures to further reduce taxpayer exposure and risks to the long-term stability of the sector.
- New adjustments regarding rules for government-backed mortgage insurance four times since 2008, including requiring a minimum down payment of 5 per cent and establishing a maximum amortization period of 25 years for mortgages with a down payment of less than 20 per cent.
- Private mortgage insurers and Canada Mortgage and Housing Corporation (CMHC) pay guarantee fees to the Receiver General to compensate the Government for mortgage insurance risks.
These measures are to ensure the health of Canada’s housing framework, and will support the stability of the real estate market as well as the federal financial system over the long-term.
To find out more about the 2015 Federal Budget and how it affects you, click here.