Home prices drove affordability improvements in 10 of 13 major cities last month
Home affordability improved in the majority of Canadian markets in October, but the gains may prove short-lived.
A new analysis from Ratehub.ca found that 10 of 13 major cities studied saw borrowers require less income to purchase the average home, driven almost entirely by modest price declines rather than lower mortgage rates.
The shift reflects a housing market in flux. "Home prices were the primary driving factor for the improvement. Mortgage rates remained unchanged month-over-month," said Penelope Graham, mortgage expert at Ratehub.ca.
The five-year fixed mortgage rate held steady at 4.47%, with a corresponding stress test rate of 6.47%.
Vancouver posted the largest monthly gains. The benchmark home price dropped $9,600 to $1,132,500, reducing the income required to qualify for a mortgage by $1,800.
A buyer in that scenario would save $49 monthly on their mortgage payment. Hamilton followed, with home prices declining $6,100 and the required qualifying income falling by $1,150.
Yet momentum appeared to weaken. Three cities saw affordability deteriorate, with Fredericton recording the steepest decline. Average home prices in the Nova Scotia city rose $7,500, pushing the required income needed to buy up $1,440 and monthly mortgage payments up $38.
For borrowers seeking relief, the window for rate cuts may be closing. The Bank of Canada signaled October's quarter-point reduction would likely be its last for now, citing stabilizing inflation and a more predictable global trade landscape.
"The current rate policy is 'about the right level' to keep the economy on a straight path," the central bank's Governing Council said in its October 29 announcement.
Looking ahead, Graham advised urgency. "The best 5-year fixed rate on Ratehub.ca continues to be 3.79%. Securing a lower rate will have a big impact on how much you can qualify for. Looking at the average national home price of $690,195 that could mean a savings of $238 per month, or $2,856 per year," she said.
"Familiarize yourself with the current interest rate environment if you're entering the home buying market or if you have a renewal coming up. Consider getting a pre-approval to lock in today's lowest rate for up to 120 days."
Meanwhile, Canadian home sales saw a modest uptick in October, with activity edging up 0.9% month-over-month according to the Canadian Real Estate Association (CREA).
That continuing sluggishness suggests that plenty of buyers are still waiting to see what’s in store for the economy – and whether Canada and the US can strike a deal to end the ongoing trade war, according to Royal LePage vice president, research and communications Anne-Elise Cugliari Allegritti.
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