EDITORIAL: Mortgage program adds risk for buyers

New loan could also drive up house prices at the lower end of the market

The new B.C. Home Owner Mortgage and Equity Partnership program came as welcome news for those looking to buy their first home.

With home ownership in Greater Victoria and on the Lower Mainland becoming increasingly unattainable for millennials, the concept of providing down payment help sounds rather enticing. If a first-time home buyer can sock away up to $37,500 for a down payment, the province will match that, with the total eligible for purchasing a home worth up to $750,000.

Brilliant. But a closer look reveals that this program constitutes a loan, one that will accumulate interest after five years.

The $750,000 mark is very close to the Victoria Real Estate Board’s benchmark price for a typical single-family detached home in the Greater Victoria core right now – a rather scary prospect for families looking for a multi-bedroom home in town.

There are certainly other options, although the supply remains short. On the West Shore, the benchmark price for all types of homes – condos to single-family detached – range from $505,000 in Langford and $561,700 in Colwood up to $1.15 million in Highlands. Many newer homes here are in developments with strata fees, which add to housing costs.

There’s also a decent chance this move by the government, seemingly meant as a stimulus, will lead to an increase in prices at the lower end of the real estate market with more buyers looking for those entry-level properties that are in short supply these days.

And that brings us to the financial aspect. If an individual can’t afford the entirety of their down payment, should they really be buying in the first place? The provincial loan will eventually accumulate interest, which may compound any financial difficulties a newly minted owner might already be having.

While renting has its drawbacks, it can be a money saver that allows an individual to invest those savings elsewhere. It also removes the risk of home ownership and the untimely repair and renovation costs that can arise. It’s rarely seen as an attractive option when compared to ownership, but for many, it’s the best option.

It’s certainly the best for anyone who needs a government loan to cover a down payment.