BMO Investment Survey: Over Half of First Time Homebuyers Plan to Use First Home Savings Account (FHSA) to Buy a Home

• Canadians' increasingly aware of FHSA features and benefits.
• Homebuyers divided over how mortgage rate changes will affect their ability to buy a home in the next two years.
• 23% of parents are expected to use the FHSA to help their children save for a home.

TORONTO, Dec. 18, 2024 /CNW/ - BMO's 15^th annual Investment Survey reveals more than half (56%) of potential first-time homebuyers are planning to use the First Home Savings Account (FHSA) to help purchase their first home, up from 52% from 2023. The annual survey also finds the understanding of FHSAs is increasing and that parents are finding the FHSA an effective way to help their adult children save for a home.

Mind The Knowledge Gap
The FHSA knowledge gap is narrowing, with two fifths (40%) of Canadians indicating they have at least some knowledge of the account, up from 31% from last year. Nearly half (48%) of Gen Z are knowledgeable about the FHSA's features and benefits – the highest among any age group.

A (Tax-Free) Gift That Keeps on Giving
The BMO Investment Survey also explores how families across generations may be using the FHSA as a financial gift for their children. Nearly a quarter (23%) of parents will likely use the FHSA to help their adult children save for their first home.

Younger parents are also more likely to use the FHSA to help their adult children save for a home, according to the survey's findings:

• Millennial Parents: 42%
• Gen Z Parents: 21%
• Boomer Parents: 7%

"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 because the FHSA is such a powerful tool. Benefits including the ability to make tax-deducible contributions, tax-free growth of the investments and the ability to hold various investment types make this plan the most advantageous way to save for a home. It is like an RRSP and TFSA rolled into one for first-time homebuyers," said Nicole Ow, Vice President and Head, Retail Investments, BMO. "For most, buying their first home will be part of a multi-year plan, involving several savings vehicles like the FHSA, RRSP withdrawals through the Home Buyers Plan, and may also involve multiple generations, with parents and grandparents contributing financially."

A House Divided
The BMO Investment Survey also reveals diverging perspectives on how changes in mortgage rates would affect potential homebuyers' ability to purchase a home in the future. Even though mortgage rates have generally fallen over the past year, just 36% of prospective homebuyers believe the changes in mortgage rates will make it more likely that they will purchase a home in the next two years, while 39% have concerns that changes in mortgage rates will make it less likely they will be able to purchase a home.

"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," said Robert Kavcic, Senior Economist, BMO Capital Markets. "Sales volumes have bounced back from last year and we are seeing prices stabilize. Most buyers' markets are disappearing, although there are still a few clear pockets of weakness. All told, we are expecting fairly steady sales and price activity through 2025."

New Mortgage Rules
First time homebuyers were also asked how the new relaxed mortgage rules would influence their ability to purchase a home, with over a third (36%) responding that they expect the new rules will make it easier to make a purchase. The new rules allow for amortizations of up to 30 years for first-time homebuyers and on any new construction purchase, as well as an increase in the maximum amount for an insured mortgage rising to $1.5 million from $1 million.

Features and Benefits of the FHSA
The FHSA combines some of the benefits of a Registered Retirement Saving Plan (RRSP) and a Tax-Free Savings Account (TFSA). The FHSA allows investors to hold several asset types within the account, which may include cash, GICs, ETFs, mutual funds or specific securities like stocks or bonds. FHSA contributions are tax-deductible, earnings are tax-sheltered, and withdrawals are tax-free when used towards qualified first-time home purchases. First time home buyers can contribute up to $8,000 a year and that yearly contribution limit can be carried forward, with a lifetime contribution limit of $40,000.

For more information about BMO's FHSAs, please visit: www.bmo.com/fhsa.

Study Methodology
This study was conducted by Pollara with an online sample of 1,500 adult Canadians aged 18 years and above. This research was conducted from November 8th to 18th, 2024. While margin of error cannot be calculated on a non-probability sample, for comparison purposes, a probability sample of 1500 respondents would have a margin of error of ±2.5%, 19 times out of 20.

Disclaimer
This message is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual's investment objectives and professional advice should be obtained with respect to any circumstance.

About BMO Financial Group
BMO Financial Group is the eighth largest bank in North America by assets, with total assets of $1.41 trillion as of October 31, 2024. Serving customers for 200 years and counting, BMO is a diverse team of highly engaged employees providing a broad range of personal and commercial banking, wealth management, global markets and investment banking products and services to 13 million customers across Canada, the United States, and in select markets globally. Driven by a single purpose, to Boldly Grow the Good in business and life, BMO is committed to driving positive change in the world, and making progress for a thriving economy, sustainable future, and inclusive society. 

SOURCE BMO Financial Group

Media Contact: Aaron Sobeski, Toronto, [email protected], [phone]