Homebuyers are finally seeing relief in many major Canadian markets
Prospective homebuyers across Canada saw a brief reprieve in July as a mix of easing mortgage rates and stable home prices improved affordability conditions in nearly every major market, according to Ratehub.ca’s latest Affordability Report.
The study, which examines average home prices, mortgage rates, and the mortgage stress test, found that 12 of 13 Canadian cities became more affordable for buyers last month.
“This month, the majority of the cities we studied saw improved home affordability,” said Penelope Graham, mortgage expert at Ratehub.ca. “Mortgage rates dropped slightly this month and most cities also saw home prices decline.”
National prices hold steady while rates dip
Data from the Canadian Real Estate Association (CREA) showed the national average home price was nearly unchanged year over year at $672,784, up just 0.6%. Despite stronger sales activity, prices have not yet begun to rise.
Meanwhile, the average five-year fixed mortgage rate in the study eased to 4.4% in July, down from 4.8% in June. The mortgage stress test also fell to 6.4% from 6.48%, helping borrowers qualify for larger mortgages.
“With sales posting a fourth consecutive increase in July, and almost 4% at that, the long-anticipated post-inflation crisis pickup in housing seems to have finally arrived,” said Shaun Cathcart, CREA’s senior economist. “Looking ahead a little bit, it will be interesting to see how buyers react to the burst of new supply that typically shows up in the first half of September.”
Toronto leads in improved affordability
Toronto saw the largest affordability gain for the second month in a row, as average home prices fell by $14,100 to $981,000. Buyers in the city required $4,040 less annual income to purchase the average home compared with June, and monthly mortgage payments dropped by $112.
Other cities that saw notable improvements included Hamilton, Vancouver, Halifax, and Edmonton.
By contrast, St. John’s was the only market where affordability worsened. Buyers there needed an additional $710 in income due to a $6,600 increase in average home prices. “This is the third month where St. John’s has seen an increase in income required to purchase a home,” Graham noted.
Outlook depends on rate trends
While July’s conditions favoured buyers, the improvement may be temporary. Fixed mortgage rates have already edged higher in August, with the lowest insured five-year rate now at 4.04% amid rising bond yields.
Graham advised borrowers to act quickly. “If you’re currently shopping for a home or coming up for a renewal, it’s a good idea to take a look at what rates are currently available to you and consider getting a pre-approval to lock in today’s lowest rate for up to 120 days.”
Market watchers will be looking to the Bank of Canada’s September 17 rate announcement, which could influence borrowing costs in the months ahead.
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