First home savings account: Banks say they’re not ready for an April 1 launch

Click to play video: 'Ask an Expert: First Home Savings Account'
Ask an Expert: First Home Savings Account
The FHSA is a tax-free savings account designed to help Canadians save for a down payment. Tax consultant Gerry Vittoratos walks us through the advantages it has and why it may be more beneficial than an RRSP or TFSA – Jan 29, 2023

A new savings vehicle for Canadians saving towards their first home purchase will technically be available starting April 1, but financial institutions who spoke to Global News say they won’t be ready to offer the account on that date and Ottawa offered no timeline for when deposits might start flowing.

The First Home Savings Account (FHSA), a cornerstone of the federal government’s 2022 budget, officially comes into effect at the start of next month under legislation passed earlier this year.

The account will allow Canadians to make contributions of up to $8,000 per year to a maximum of $40,000 across their lifetime to save towards the purchase of a first home. Contributions to the account will be deductible against income, and any amounts as well as interest earned on investments within the account will also be tax-free upon withdrawal.

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Global News reached out to Canada’s big six banks as well as online financial institutions and some credit unions to hear about their plans for rolling out the savings account.

Institutions that spoke to Global News the week of March 13 said that while they were keen to offer the FHSA, none could confirm they would be ready in time for April 1.

However, on March 31, a spokesperson for online brokerage firm Questrade told Global News it would be launching its FHSA April 1.

Royal Bank of Canada said it was looking to offer the FHSA sometime in the spring; others, including TD Bank, CIBC and BMO, pegged the launch for sometime in the 2023 tax year. Scotiabank said it hopes to offer the account “soon.”

“We’re working to make the FHSA available to our clients as quickly as possible after the legislation comes into effect on April 1,” read a statement from National Bank of Canada.

“We’re making every effort to obtain the government authorizations required so we can offer this new plan, while carrying out the necessary technological development.”

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Digital-first financial services firms such as Wealthsimple and EQ Bank are also working on providing the FHSA.

EQ Bank said it was “very keen” on offering the account but said it hadn’t received tax reporting guidelines for the FHSA from the Canada Revenue Agency.

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Click to play video: 'Federal budget includes tax-free savings account for first-time homebuyers'
Federal budget includes tax-free savings account for first-time homebuyers

“Given the detailed parameters for the FHSA are not yet available, we won’t be in market with the FHSA on April 1,” Mahima Poddar, EQ Bank’s group head of personal banking, said in a statement to Global News on Friday.

The CRA said in a statement to Global News on Tuesday afternoon that the government has given financial institutions “all the necessary information” needed to offer FHSAs to Canadians.

It said institutions can submit application packages to the CRA to offer the FHSA, but the agency declined to say which banks applied, citing confidentiality requirements.

“The CRA is working with these institutions as part of an approval process to ensure that each financial institution’s product meets the requirements of the FHSA program,” a spokesperson said in the emailed statement to Global News.

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The FHSA was first announced as part of the Liberals’ 2022 federal budget in April of last year among a suite of initiatives aimed at making the housing market more accessible to Canadians who have struggled to buy a home.

While some initiatives from that budget have come into effect, including a temporary ban on foreign buyers, other proposals, such as a potential Home Buyers’ Bill of Rights to end blind bidding on properties, have yet to be introduced.

Finance Minister Chrystia Freeland is set to unveil the government’s budget for 2023 on March 28, with Canadians not yet knowing when they’ll be able open FHSAs.

Global News reached out to Freeland’s office to ask why the account from the previous budget will not be on offer by April 1.

“Rising housing costs have put a tight squeeze on middle class Canadians and young people are more worried than ever about owning a home. That is why our government campaigned on creating the Tax-Free First Home Savings Account,” Freeland’s press secretary Adrienne Vaupshas said in a statement to Global News.

The government has said previously that it expects Canadians to be able to open and contribute to the FHSA at some point this year, with the full contribution room available for the 2023 tax year.

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Global News asked the same questions to Housing Minister Ahmed Hussen but a spokesperson deferred comment to the Department of Finance.

Desjardins is among the financial institutions keen to offer the FHSA. It has set a target launch for the summer of 2023.

In a statement explaining the delay to Global News, Desjardins said the process of setting up a savings account with bearings on Canadians’ tax filings — like a tax-free savings account (TFSA) or registered retirement savings plan (RRSP) — is “complex” and requires significant linkages between the financial sector and government.

“This requires significant technology development, as well as coordination with Canada Revenue Agency, to ensure that individual clients are eligible for example, and the procedures for the annual declaration of transactions to the CRA that allows the issuance of tax slips,” the statement read.

To make up for the delay, Desjardins launched a campaign on March 7 offering a promotional savings rate for anyone keen to open an FHSA, with the ability to transfer deposits in these accounts to the homebuyer savings account when available.

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