Recovering home prices point to a grim outlook for many Canadian buyers
Home affordability deteriorated in eight of 13 major Canadian cities during May as recovering home prices offset the benefits of stable mortgage rates, according to a new report from Ratehub.ca.
The mortgage comparison site’s monthly affordability analysis found that rising home prices drove the changes, as mortgage rates remained largely unchanged throughout the month. The Bank of Canada held its benchmark overnight lending rate steady at 2.75%, keeping the average five-year fixed mortgage rate at 4.38%.
“Mortgage rates remained unchanged again this month, which means affordability changes were due to home price increases and decreases in each city,” said Penelope Graham, mortgage expert at Ratehub.ca.
The national average home price reached $691,299 in May, marking a 1.9% increase from April despite remaining 1.8% below year-ago levels. According to the Canadian Real Estate Association, home sales increased monthly for the first time in more than six months, signalling potential market recovery.
Hamilton experienced the most dramatic improvement in affordability, with buyers needing $3,480 less income to purchase the average home. This improvement was attributed to an $18,300 drop in average home prices, the largest decrease among all cities studied. Hamilton buyers could save $93 monthly on mortgage payments compared to April purchases.
Conversely, St. John’s saw the steepest decline in affordability, requiring an additional $1,690 in income to buy the average home following an $8,900 price increase. Monthly mortgage payments in St. John’s rose by $45.
Other cities experiencing worsened affordability included Halifax, Regina, Montreal, Toronto, Winnipeg, Edmonton, and Fredericton. Calgary remained unchanged, while Ottawa, Victoria, and Vancouver saw modest improvements.
The report measured affordability based on income required to qualify for mortgages under current stress test rules, using a 10% down payment and 25-year amortization.
May 2025: Home affordability report
Source: Ratehub.ca. (This report is for illustration purposes only. Data is based on a mortgage with a 10% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in April and May 2025. Average home prices are from the CREA MLS® Home Price Index (HPI).)
Graham warned that favourable buying conditions may be ending. “While buyers have enjoyed attractive housing affordability conditions throughout the spring, those days may be numbered,” she said, citing firming sales and rising bond yields that could pressure fixed mortgage rates higher.
The analysis used average rates from Canada’s Big Five banks, though Graham noted that securing lower rates, such as the current best available 3.84%, would significantly impact qualification amounts.
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