There’s been a lot of interest in opening a first home savings account (FHSA) among Canadians since the federal government introduced the registered plan in April, banks say, with tens of thousands of accounts already opened in just a few months.

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The new tax-free account has been particularly popular among younger Canadians said Royal Bank of Canada, one of the banks that currently offer the service, in a press release.

The FHSA allows prospective first-time homebuyers to save for their first home tax-free, with a common contribution limit of $8,000 annually and a lifetime total of $40,000.

“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,” Flora Do, vice-president of RBC’s investments transformation and client segments, said.

RBC said more than a quarter of FHSA holders with the bank have already contributed all or most of the $8,000 maximum annual amount and the same percentage are contributing regularly using pre-authorized contributions.

Ali Fares, vice-president of investment strategies at National Bank of Canada, which was the first Canadian bank to launch an FHSA on April 17, said the number of clients that first opened an account with them was above the bank’s expectations.

The majority of National Bank’s FHSA clients are funding their accounts to the maximum allocated $8,000 as well, Fares said, which was also “above expectations.”

“There’s a large number of clients who want to purchase homes this year and that’s why they’re looking for institutions who are offering it right away to get the advantage of that $8,000,” he said.

So far, RBC and National Bank are the only two major Canadian banks that offer the FHSA. Some other financial institutions such as a credit unions, trust companies or insurance companies also offer the account.

According to their websites, the Bank of Nova Scotia will start offering FHSAs in late August, while it will be available at Toronto-Dominion Bank “in summer 2023.” Canadian Imperial Bank of Commerce said the FHSA is coming to the bank in November, while Bank of Montreal has no date specified.

RBC said the most common investments they’re seeing currently are exchange-traded funds (ETFs) and stocks, with mutual funds and a variety of GICs also available among investing options.

The bank allows clients to either open a self-directed investment account, in which they can invest in stocks, ETFs, mutual funds, GICs, options and bonds themselves, or have a professional team of portfolio advisers select, buy and manage a portfolio of ETFs on a client’s behalf.

It said 56 per cent of FHSAs at RBC are held by clients aged 25 to 34, while 20 per cent of FHSA holders are aged 35 to 44, 18 per cent are aged 18 to 24 and six per cent are over 45 years old.

“It’s wonderful to see Canadians seizing the opportunity to open and contribute to FHSAs right away, so they can bring their dream of home ownership closer to reality and also take advantage of the tax deduction before the end of the 2023 calendar year,” Do said.

As of June 30, just over five per cent of RBC’s FHSA account holders have already made qualifying tax-free withdrawals for their down payment and will also benefit from the available tax deduction for the 2023 calendar year, the bank said.

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