Ratehub data showed prices, not rates, drove January's affordability shift
It became easier to qualify for a mortgage in most major Canadian cities in January, as softer prices rather than cheaper borrowing costs nudged home affordability in the right direction.
Ratehub.ca’s latest Home Affordability Report showed that 12 of 13 large markets required less income to purchase an average‑priced home compared with December, with only Montreal moving against the trend.
That shift unfolded against a backdrop of monetary policy stability. The Bank of Canada held its policy rate at 2.25% at its January 28 announcement, keeping the overnight rate at the bottom of the neutral range while warning that heightened trade‑related uncertainty makes the next move unusually difficult to predict.
Plateau in rates placed more of the affordability burden on home prices and buyer confidence rather than on sudden payment shocks.
“Home affordability improved in all except one of the cities we studied,” Penelope Graham, mortgage expert at Ratehub.ca, said.
“Home prices were the primary driving factor for the improvement. Mortgage rates decreased slightly month‑over‑month, but not enough to have a big impact on the income required to buy a home.”
Vancouver saw the sharpest reset
“Vancouver saw the most improvement in affordability, with the average home price down $12,900 cutting the income needed to buy by $3,600,” Graham said.
“The Vancouver borrower in this scenario would pay $100 dollars less on their monthly mortgage payment, or $1,200 per a year, in January compared to if they bought in December.”
Similar, if smaller, gains appeared in Toronto and Ottawa, where month‑over‑month price declines of $7,100 and $7,000 respectively reduced required incomes by more than $1,900 in each city.
Montreal bucked the national pattern
“Montreal was the only city that saw home affordability worsen, with $680 in additional income required to purchase the average home,” Graham said.
“This is due to the average home price increase of $6,600. The Montreal borrower in this scenario would pay $16 dollars more on their monthly mortgage payment, or $192 per a year, in January compared to if they bought in December.”
Prices now matter more than rates
Ratehub’s scenario analysis relied on a 10% down payment, 25‑year amortization and Big Five 5‑year fixed rates averaging 4.40% in January, down slightly from 4.46% a month earlier.
“The best 5‑year fixed rate on Ratehub.ca is 3.79%, slightly down from last month,” Graham said, adding that on a national average home price of $652,941, “that could mean a savings of $202 per month, or $2,424 per year.” These savings were illustrative and depended on borrowers qualifying at those lower rates, rather than the Big Five average used in the report’s core calculations.
Canadian Real Estate Association (CREA) data also showed the National Composite MLS Home Price Index fell 0.9% month over month in January, with the average national price down 2.6% year over year to $652,941, reinforcing the picture of price‑driven relief rather than a rate‑cut‑led boom.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
