Rate, price decreases boost purchasing power across Canada
Falling resale home prices and lower interest rates on mortgages have boosted housing affordability across major Canadian cities, including Calgary, a new report has found.
Ratehub.ca released a study measuring the amount of household annual income needed to qualify for a 20 per cent down payment on a five-year, fixed-rate mortgage for the average-priced home in 14 Canadian markets.
All cities saw decreases in income required to qualify this past July versus July last year, largely due to a drop in mortgage costs.
The average five-year, fixed mortgage fell to 5.29 per cent in July versus 5.47 per cent a year ago. The report, however, calculated the income required to qualify under the federal stress test rules, requiring borrowers to be able to afford the interest rate offered plus two percentage points.
In July, that threshold was 7.29 per cent versus 7.47 per cent in July 2023.
At the same time, average home prices fell in nine of 14 markets. Calgary saw its average price fall $400 year over year to $588,600. With the price drop and lower borrowing costs, a Calgary buyer would require an income of $118,980 to qualify for a mortgage for the average priced home, or $1,690 less than a year ago.
The largest drop in income requirements was in Toronto where a buyer needed $208,950 to qualify for a mortgage for the average priced home at $1,097,300. That’s an income requirement decrease of $5,410 from July 2023.
Even in cities where prices increased, the lower cost of borrowing made homes more affordable, the report found. That includes St. John’s, NL, where the average price increased by $4,500 to $349,700. There, a buyer would require an income of $76,720 to qualify for a mortgage, a decrease of $160 from the same month last year.
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