The British Columbia government has opened up applications for its loan program for first-time home buyers, just three months before the provincial election campaign begins.

Economists have warned the B.C. Home Owner Mortgage and Equity Partnership – an interest-free loan program aimed at new buyers – could inflate an already overheated real estate market.

But as a populist measure, the program's success will be determined by the number of applicants who benefit from it. By mid-afternoon on the first day, 29 applications for the program had been filed online. BC Housing expects roughly 42,000 applications over the coming three years.

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"There are already eight people, eight families, who [on Tuesday] will be told they can go buy their first home," Rich Coleman, the B.C. minister responsible for housing, told a news conference on Monday.

The provincewide program, announced in December, offers a matching loan that is interest-free and payment-free for the first five years to residents buying their first home. The loans, which are available for homes worth up to $750,000, are capped at 5 per cent of a property's purchase price. The government could contribute up to $37,500 for each eligible home purchase, providing the buyer already has that much saved for a down payment.

Over the next three years, the province expects to spend $702-million on the program.

With a provincial election looming, the Liberals were feeling criticism that many families are unable to afford a home, particularly in the Metro Vancouver region. In response, the B.C. government has rolled out a string of initiatives over the past year to address housing affordability, including efforts to rein in foreign ownership and to boost the amount of rental housing stock.

Mr. Coleman said there is a strong appeal in helping young families buy their first home. "If you get into the market, it can change your life," he said, recounting his own experience with breaking into the real estate market in the 1970s, when he and his wife purchased a modest mobile home in Alberta.

Realtors say they expect first-time buyers will welcome the program.

"As this program rolls out, there will be an appetite for it," said Darren Day, a Victoria realtor with RE/MAX Camosun.

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Karie Seiss, a realtor with RE/MAX Alliance, said clients are interested but the details are still scarce. "We certainly have buyers interested in the program," she said, but added that it is not yet clear how lenders will assess mortgage eligibility under the new program.

On Monday, the Canada Mortgage and Housing Corp. clarified that the loan from the province, although it will not have to be repaid for five years, will be counted as debt when the agency determines eligibility.

The CMHC will play key role because potential applicants for the B.C. assistance program must qualify for a high-ratio insured first mortgage from CMHC.

"We will be applying our usual standards to borrowers taking advantage of the support program," CMHC spokesman Charles Sauriol said. "These standards include testing a borrower's ability to repay not only their mortgage but also their other debts, including the new incentive." As well, buyers who qualify for the B.C. loan will have to pay CMHC an insurance surcharge because their application would fall under a "non-traditional down payment."

Helmut Pastrick, chief economist for Central 1 Credit Union, said the BC HOME Partnership program will have the effect of diluting the efforts of the federal government to ensure Canadians aren't taking on bigger mortgages than they can afford in an era of historically low interest rates.

"It will go some way to offsetting the tougher underwriting criteria the federal government brought in last October," he said. "Those two policies are at cross purposes, to some extent."

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Whether the program is deemed a success or failure, Mr. Pastrick added, depends on where you are in relation to the B.C. real estate market. He predicted first-time buyers will appreciate the assistance program, even if it does create some negative repercussions.

"If you are a buyer, builder, developer or realtor, it's viewed as a positive," he said. "But if you are concerned about household debt, or if you feel real estate prices are too high already, that this market is overvalued and divorced from local incomes, then you probably view it as a negative."