Parents and first-time buyers boost FHSA use as homeownership plans take shape for 2025
BMO’s 15th annual Investment Survey shows growing interest in the First Home Savings Account (FHSA) as Canadians plan for home ownership.
Over half (56 percent) of potential first-time homebuyers intend to use the FHSA in 2025, up from 52 percent in 2023.
The report also highlights increasing awareness of the FHSA and its benefits, as well as intergenerational financial support for home savings.
The survey reveals that Canadians’ knowledge of the FHSA is improving. Two-fifths (40 percent) of respondents said they understand the account’s features, up from 31 percent last year.
Gen Z demonstrated the highest awareness, with 48 percent indicating familiarity with the FHSA’s benefits.
Parents increasingly view the FHSA as an effective way to help their children save for a home. Nearly a quarter (23 percent) of parents plan to use the FHSA to support their adult children.
Younger parents are particularly engaged:
- Millennial parents: 42 percent
- Gen Z parents: 21 percent
- Boomer parents: 7 percent
Nicole Ow, vice president and head of Retail Investments at BMO, highlighted the benefits of the FHSA, stating, “It is encouraging to see that over half of prospective buyers plan to use the First Home Savings Account to save, and we want to see that number grow.”
She explained that the FHSA combines advantages like tax-deductible contributions, tax-free investment growth, and the flexibility to hold various investment types, describing it as “like an RRSP and TFSA rolled into one for first-time homebuyers.”
The report shows divided perspectives on mortgage rates. While mortgage rates have fallen over the past year, only 36 percent of prospective homebuyers believe this will improve their ability to buy a home within two years.
Conversely, 39 percent worry that rate changes could make purchasing a home less likely.
Robert Kavcic, senior economist at BMO Capital Markets, characterized the housing market as stabilizing, stating, “The Canadian housing market seems to be going through a transitional phase, with activity picking up on the back of Bank of Canada rate cuts and more available inventory.”
He noted that sales volumes have rebounded from the previous year and prices are stabilizing. While most buyers’ markets are fading, a few areas still show weakness. Kavcic concluded that BMO expects “fairly steady sales and price activity through 2025.”
New mortgage rules are expected to ease challenges for first-time homebuyers. Over a third (36 percent) of respondents believe the rules will make purchasing a home easier.
Key changes include:
- Amortization periods extended up to 30 years for first-time homebuyers and new construction purchases.
- An increase in the insured mortgage maximum to $1.5m, up from $1m.
The FHSA combines elements of a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP), offering:
- Tax-deductible contributions.
- Tax-sheltered earnings.
- Tax-free withdrawals when used for a qualifying first-time home purchase.
The FHSA allows contributions of up to $8,000 annually, with unused amounts carried forward. The lifetime contribution limit is $40,000.
Investors can hold various assets within the account, including cash, GICs, ETFs, mutual funds, stocks, and bonds.
