Housing affordability index smack down!

Canadian homes affordable or not?

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From the November 2014 issue of the magazine.

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(iStock)

(iStock)

The Bank of Canada’s recently revamped Housing Affordability Index says “yes,” while the more widely-known RBC Housing Affordability Measures says “no,” claiming that home ownership costs now exceed the long-term average. So who’s right? Mortgage expert Rob McLister says the two organizations have come to different conclusions because they’re using different sets of assumed mortgage rates. The new Bank of Canada index uses discounted rates, better reflecting the rates consumers are actually getting. Meanwhile, RBC only uses posted five-year fixed mortgage rates, which tends to overstate carrying costs, as many consumers do better. To McLister, “that difference gives the Bank of Canada’s index an edge.”

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