In November 2023, Canadian housing markets generally saw an improvement in affordability despite a slight increase in mortgage rates.
Data from Ratehub.ca indicates that the average required income to purchase a home has decreased in most cities, with real estate prices falling enough to mitigate the impact of higher borrowing costs.
Rate Hub says mortgage rates rose minimally to 6.5%, with the stress test rate also increasing to 8.5%.
The decline in home values, coupled with stable mortgage rates, has contributed to better affordability in November, and Rate Hub expects the trend to extend into December with anticipated drops in both rates and home values. The analysis considers the minimum yearly income needed to buy an average home, taking into account the fluctuations in mortgage and stress test rates as well as property prices.
Only Alberta’s largest city saw an average home price rise by $2,000 to $557,400, leading to a higher income requirement of $660 while Edmonton saw a $2,200 decrease in home prices, and the required income went down by $260.
Conversely, Hamilton experienced the most significant gain in affordability, with the average home price falling by $23,400 to $805,700 and Toronto is not far behind as the average price decreased by $22,300, with a substantial $3,850 decrease in the required income. Ottawa also showed a $9,700 reduction in home prices and a $1,570 drop in required income.
Winnipeg experienced a significant reduction in average home price by $7,600, with a corresponding $1,330 decrease in required income.
Victoria’s prices dropped by $9,400, and income requirements decreased by $1,400.
Vancouver’s average home price fell by $11,400, and the income needed decreased by $1,660. Halifax saw an $18,900 drop in home prices, resulting in a $3,450 reduction in required income.
“Affordability improved for the second month in a row due to home values dropping and mortgage rates holding steady in November,” said James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender.
“We expect this trend to continue in December with rates and home values dropping.”
Credit: Rate Hub
Rate Hub assumed a 20% down payment, a 25-year loan term, annual property taxes of $4,000, and monthly heating costs of $150, with mortgage rates averaged from the Big Five Canadian Banks’ 5-year fixed rates for November and October 2023, and home price averages sourced from the CREA MLS® Home Price Index.