Canada’s National Bank and Royal Bank of Canada have become the first major banks to offer the new tax-free First Home Savings Account (FHSA) to prospective homebuyers. The FHSA was announced in the federal budget in 2022 as a savings account that combines the features of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). It allows individuals to make tax-deductible contributions, and earnings in the account are tax-free if they are used for a home purchase once withdrawn. The account has a lifetime limit of $40,000 and an annual contribution limit of $8,000, with unused portions being able to carry forward into the next year. The account is open to Canadian residents who are first-time homebuyers between the ages of 18 and 71, except in provinces where the legal age to enter into a contract is 19.
The FHSA has been launched to address the growing concerns around housing affordability and is aimed at supporting first-time homebuyers who have been struggling to purchase their first homes in the current real estate market. National Bank and Royal Bank of Canada have made the FHSA option available to customers through digital platforms, by speaking with a financial advisor, or by visiting a bank branch. The FHSA is also available through online investing firms like Questrade and Fidelity Investments Canada.
RBC’s executive vice president of personal banking and investments, Erica Nielsen, stated that the bank’s research indicated strong interest in the FHSA among prospective homeowners. According to Nielsen, “almost one-third of those who aren’t yet homeowners” stated that they were planning to use the account to save for a home purchase. The FHSA has a 15-year duration, after which time the account will be closed, the individual will turn 71, or they will make their first qualifying withdrawal, whichever comes first.
When the government launched the FHSA on April 1, none of the major six Canadian banks did so; however, TD Bank, BMO, CIBC, and Scotiabank have all stated that they will soon offer the account. TD Bank is aiming to launch the account option in summer 2023 and is inviting customers to sign up for updates on its website. BMO said the FHSA accounts will be available to customers “around mid-2023,” and CIBC plans to offer the FHSA “later this year” and will share more about the exact timeline “in the coming months.” Scotiabank is “targeting to offer the new first-time homebuyer’s savings account to customers in the 2023 tax year.”
In conclusion, the FHSA offers a viable option for prospective homebuyers to save for a home purchase while benefiting from tax-free contributions and earnings. The recent launch of the FHSA by National Bank and Royal Bank of Canada has set a precedent for other major banks to offer the account in the future, providing greater accessibility and options for Canadians to achieve their dream of homeownership.