Tens of thousands of Canadians taking advantage of the new First Home Savings Account: RBC

The Royal Bank of Canada says it has seen a “phenomenal early uptake” in the First Home Savings Account (FHSA), a new program where prospective homebuyers can start saving and investing for a down payment tax-free.

In a news release Thursday, RBC said Canadians have opened “tens of thousands” of accounts since the rules for the program came into effect on April 1.

“We’re seeing amazing interest in this new tax-free account, particularly among younger Canadians who are building a down payment for their first home,” Flora Do, vice-president of investments transformation and client segments, said in a statement.

“Since our April launch, tens of thousands of RBC FHSAs have been opened by Canadians — phenomenal early uptake of this innovative way to save and invest for a first home.”

RBC did not say exactly how many accounts had opened so far this year, but says that 26 per cent of its FHSA holders have already contributed all or most of the $8,000 maximum annual amount, with a similar percentage also making regular pre-authorized contributions.

RBC clients between the ages of 25 and 34 make up the largest proportion of the bank’s FHSA holders at 56 per cent, the bank said. This is followed by clients aged 35 to 44 at 20 per cent, those between the ages of 18 and 24 at 18 per cent and clients 45 and older at six per cent.

The most common investments made using FHSAs are exchange traded funds (ETFs) and stocks, RBC said.

With a FHSA, account holders can start saving for up to 15 years, with a cap on annual deposits of $8,000 starting the year the account opens and a lifetime contribution limit of $40,000.

Similar to a Registered Retirement Savings Plan, or RRSP, deposits can be claimed as a deduction against taxable income.

Investments can grow in the account and be withdrawn tax-free, similar to a Tax-Free Savings Account, or TFSA, if used for a down payment.

Unused portions of the annual contribution limit can be carried forward into the following year, up to $8,000, while any unused savings can be transferred tax-free into an RRSP or Registered Retirement Income Fund.

With files from The Canadian Press