How much income do I need to qualify for a mortgage in Canada?
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Ratehub
The April 2024 data is in. Find out if your salary can buy you a home in these Canadian cities.
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Created By
Ratehub
The April 2024 data is in. Find out if your salary can buy you a home in these Canadian cities.
After several years of sky-high borrowing costs, mortgage rates are (finally!) starting to ease up. That’s great news for cash-strapped Canadians currently shopping for the best mortgage rate—but it unfortunately hasn’t translated into improved affordability when buying a home.
The national average home price came in at a hefty $703,446 in April, according to the Canadian Real Estate Association (CREA). While that marks a slight 1.7% dip from the same time period last year, it means today’s home buyers are shelling out $200,000 more to buy an average-priced home than they would have five years ago.
The short-term affordability picture isn’t looking any rosier. The latest monthly affordability study from Ratehub.ca finds that borrowing conditions got tougher in 10 out of 13 of Canada’s major housing markets in April, largely due to month-over-month growth in home prices. (Ratehub and MoneySense are both owned by Ratehub Inc.)
The study determines affordability based on the minimum income required to buy an average-priced home based on regional real estate data, as well as mortgage and stress test rates. This provides a month-to-month snapshot of how affordability is evolving in real time, along with borrowing costs and market prices.
The April data was calculated using an average five-year fixed mortgage rate of 5.5% (down from 5.62% in March), and stress test of 7.5% (the mortgage stress test requires borrowers to prove they could qualify for a mortgage at a rate 2% higher than the one they receive from their lender).
“The two key variables that impact home affordability, home values and interest rates, moved in opposite directions. Interest rates are down and home values are up in 12 out of 13 cities we looked at,” says James Laird, Co-CEO of Ratehub and president of CanWise mortgage lender.
“The increase in home values was enough such that affordability worsened in 10 of 13 cities despite the rate drop.”
Let’s take a look at what this means for Canadian home buyers in those regions.
Here are the markets in Canada where home affordability improved.
Montreal may be known for its lovely historical homes often adorned with spiral staircases, but its relative affordability is the true standout for “la belle provence’s” largest city. The average Montreal home price came in at $530,300 in April, well below that of Canada’s other major urban centres.
It was also the only city where prices decreased on a monthly basis, down $1,000 from March. While modest, this was enough to shave $1,170 off the required income to qualify for a mortgage, to $110,380.
It may seem a head-scratcher to see Vancouver—which has long held the notorious title of Canada’s most expensive city—among the markets with the greatest affordability improvement. And make no mistake: it’s still prohibitively pricey to buy a home here, at an average price of $1,205,800.
However, lower mortgage rates were enough to offset $9,000 month-over-month price growth, resulting in a minimum mortgage income requirement of $232,050. That’s$570 less than in March. It remains to be seen whether borrowing conditions will continue to ease as the spring market progresses: according to the Real Estate Board of Greater Vancouver (REBGV), real estate inventory has been steadily growing in the city, which will help take the bite out of price growth if the trend is sustained.
Victoria rounds out the top three cities where it became slightly easier to purchase a home in April. It’s also considerably more affordable than neighbouring Vancouver, with an average price of $868,000. While that increased by $7,000 from March, lower mortgage rates were forgiving enough to reduce the required minimum income to $171,180, a month-over-month drop of $370.
Here are the cities in Canada where home affordability became more difficult for buyers.
It’s worth noting that the markets where affordability worsened by the largest margin are all located on the east coast. It’s not something in the water. Rather, it’s the relatively lower price point characteristic of these markets that makes them more susceptible to volatility when buyer demand picks up.
This was most evident in Halifax, where the average home price rose $17,800 from March, to an average of $547,400. As a result, home buyers there must earn $113,450in order to qualify for a mortgage on the average-priced home. That was $2,000 more compared to the same period last year.
Fredericton actually boasted the lowest average home price in April, at $301,000. However, things are heating fast, with an $8,100 increase compared to March. That in turn has pushed the required income up by $910. Overall, one needs to earn an income of $69,080 in order to qualify for a mortgage on the average Fredericton home.
Home sales are soaring across New Brunswick as a whole, with April marking the third-highest sales total record for the month, which has in turn fueled price growth, according to the New Brunswick Real Estate Board (NREB), further indicating home buyers are returning to the market after an interest rate-induced hiatus.
Rounding out the Atlantic trifecta is St. John’s, where the average home could be bought for $342,500 in April, which marks an increase of $7,500. That’s pushed the minimum income to qualify for a mortgage up by $720, to a total of $76,550.
Newfoundland’s housing market has experienced a strong spring bounce, with April sales rising 28.2% on an annual basis, says CREA. Local buyers can expect this trend to continue into the summer months should demand persist.
Check out the chart below to see how affordability changed between February and March in Canada’s main housing markets, based on home price, and the income required to qualify for a mortgage.
City | Average home price March | Average home price April | Change in price | Income for March | Income for April | Change in income |
Halifax | $529,600 | $547,400 | $17,800 | $111,250 | $113,450 | $2,200 |
Fredericton | $292,900 | $301,000 | $8,100 | $68,170 | $69,080 | $910 |
St. John’s | $335,000 | $342,500 | $7,500 | $75,830 | $76,550 | $720 |
Regina | $313,100 | $319,800 | $6,700 | $71,850 | $72,470 | $620 |
Toronto | $1,113,600 | $1,128,100 | $14,500 | $217,500 | $218,050 | $550 |
Calgary | $580,400 | $587,300 | $6,900 | $120,480 | $120,650 | $170 |
Winnipeg | $353,600 | $358,000 | $4,400 | $79,210 | $79,350 | $140 |
Ottawa | $636,700 | $643,700 | $7,000 | $130,730 | $130,800 | $70 |
Hamilton | $850,500 | $859,600 | $9,100 | $169,640 | $169,700 | $60 |
Edmonton | $385,900 | $390,200 | $4,300 | $85,100 | $85,150 | $50 |
Victoria | $861,000 | $868,000 | $7,000 | $171,550 | $171,180 | -$370 |
Vancouver | $1,196,800 | $1,205,800 | $9,000 | $232,620 | $232,050 | -$570 |
Montreal | $531,300 | $530,300 | -$1,000 | $111,550 | $110,380 | -$1,170 |
Ratehub’s analysis breaks down regional affordability, leveraging average prices and mortgage rates to determine how they affect overall loan qualification. Canadians looking to break into the market, or are shopping around for a mortgage rate, can crunch their own numbers with resources such as the MoneySense Affordability Calculator, which personalizes outputs based on income, existing bills and debt obligations, as well as overall debt ratios.
The good news for borrowers is a slight easing in the bond market has paved the way for cheaper fixed mortgage rates in April. Banks use the bond market as a basis for their own fixed-rate pricing models, which in turn get passed along to borrowers. However, when compared to the pre- and early days of the pandemic, today’s interest rates are quite elevated. As of May 17, bond yields are hovering in the upper 3.6% range, which is fairly neutral for rate direction. However, as market sentiment can turn on a dime, fixed-rate mortgage shoppers should expect pricing to continue to fluctuate for the foreseeable future.
Variable mortgage rates, in particular, are historically high, currently in the upper 5% to 7% range for many borrowers. While there is growing optimism that the Bank of Canada is gearing up to lower its benchmark interest rate as early as this June, stubborn inflation and other economic data could still derail their rate cutting plans. As well, the central bank has made it very clear that the way down will be much slower than the way up – today’s variable borrowers can count on higher interest rates, for a longer period of time.
Navigating Canada’s fickle rate environment can be confusing, even for seasoned rate shoppers. That’s why working with a pro, such as a mortgage broker with a comprehensive view of Canada’s mortgage market, can be key in helping you determine your best borrowing option.
What are the current mortgage rates?
Check this table to compare mortgage rates in Canada right now.
This is an unpaid article that contains useful and relevant information. It was written by a content partner based on its expertise and edited by MoneySense.
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