How much income do I need to qualify for a mortgage in Canada?
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Ratehub
Find out if your salary can buy you a home in these Canadian cities.
Created By
Ratehub
Find out if your salary can buy you a home in these Canadian cities.
Buying a home in Canada isn’t for the faint of heart—or light of wallet. Home prices have steadily trended higher over the past decade, coming to a national average of $698,520 in March 2024. That’s a 75% increase compared to January 2014, and it marks a whopping dollar difference of $398,119, according to the Canadian Real Estate Association (CREA). How much money do Canadians need to earn, on average, to afford a house?
Affordability conditions aren’t likely to improve anytime soon, despite the optimism that mortgage rates will stabilize; a monthly study conducted by Ratehub.ca reveals it has become increasingly tougher to afford a home since the start of the year. (Ratehub and MoneySense are both owned by Ratehub Inc.) The study gauges affordability by calculating the minimum annual income required to purchase the average-priced home in 13 of Canada’s major housing markets, based on real estate data, as well as average mortgage and stress test rates. It measures the trends in affordability on a month-to-month basis, as rates and home prices fluctuate.
The March 2024 calculations, which are based on an average five-year fixed mortgage rate of 5.62%, and a resulting stress test of 7.62%, show home affordability declined in 12 of the 13 markets studied (Halifax was the exception), mainly due to rising home prices.
“While mortgage rates stayed relatively flat month over month, home prices increased, causing affordability to worsen,” says James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender.
Let’s take a look at what this means for Canadian home buyers in those regions.
Halifax, Regina and Fredericton top the list.
Halifax was the sole price outlier in March, posting the only month-over-month price decline. The average home price in Atlantic Canada’s largest urban market came to $529,600, down $1,600 from February. As a result, a home buyer would need an annual income of $111,250 to qualify for a mortgage; $315 less than in the previous month. While Halifax remains a tight sellers’ market, home buyers there continue to be challenged by the rising cost of living and interest rates, which may be limiting the number of sales of higher-priced detached homes.
The average home price in the City of Regina posted a modest gain of $2,500 in March, coming to $313,100. That means Regina-based home buyers require an income of $71,850 to qualify for the necessary mortgage, an increase of $410.
While the Prairie markets continue to have some of the lowest home prices in Canada, the data shows conditions are rapidly heating up. According to the Saskatchewan Realtors Association, year-to-date sales are 10% above last year’s levels, with the largest concentration of buyers in the Regina-Moose Mountain, Saskatoon-Biggar and Swift Current-Moose Jaw economic regions. That marks the ninth consecutive month of above-average sales, notes the real estate board. Meanwhile, the supply of newly listed homes declined 15% year over year, with overall inventory 40% below 10-year trends—the perfect recipe for heating prices.
Fredericton marks the third and final city where the additional required income to purchase a home remains below $1,000. The average home price there rose $2,600 on a monthly basis to $292,900, which pushed the minimum income up by $430, to $68,170. According to CREA, Fredericton home sales declined 15.2% over the course of the month.
This reflects real estate trends in New Brunswick as a whole, as home prices have steadily increased over the past three months. This is mainly due to shrinking supply, as new listings remain 12.1% below the five-year average for March. However, sales and supply could be poised to perk up should interest rate cuts materialize later this summer.
Toronto, Hamilton and Vancouver sit at the bottom of the list.
It should come as no surprise that Toronto home buyers are the most financially squeezed; home prices there escalated sharply over the pandemic’s lockdown years, and remained elevated at an average of $1,113,600 in March, up $19,700 from February. That resulted in the average buyer needing an annual income $3,400 higher than they did in February, making it now $217,500.
While home sales have chilled slightly at the start of the year, the Toronto Regional Real Estate Board (TRREB) says enough competition remains in the market to push prices higher, and that this will only tighten further as interest rates start to decline.
The City of Hamilton—which boomed in popularity in recent years as a real estate destination—came in second in terms of worsening affordability. The average home price does remain under the $1-million mark, making it a much more affordable option when compared to neighbouring Toronto. But that gap is narrowing sharply, up by $14,600 in March to an average of $850,500. In terms of income, a Hamilton buyer needs to earn $169,640 annually, an increase of $2,540.
The City of Vancouver remains Canada’s most expensive housing market, with an average price of $1,196,800 in March, up $13,500 from the previous month. As a result, a buyer there must earn $232,620 in order to qualify for the required mortgage, an increase of $2,270 compared to February.
Similarly to Toronto, home sales in Vancouver have declined slightly in the first few months of the year as supply has increased, but that hasn’t been enough to offset market demand, which has been the driving force behind price growth.
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 Feb. | Average home price Mar. | Change in price | Income for Feb. | Income for Mar. | Change in income |
Calgary | $567,900 | $580,400 | $12,500 | $118,300 | $120,480 | $2,180 |
Edmonton | $375,300 | $385,900 | $10,600 | $83,220 | $85,100 | $1,880 |
Halifax | $531,200 | $529,600 | -$1,600 | $111,600 | $111,250 | -$350 |
Hamilton | $835,900 | $850,500 | $14,600 | $167,100 | $169,640 | $2,540 |
Montreal | $519,100 | $531,300 | $12,200 | $109,400 | $111,550 | $2,150 |
Ottawa | $628,500 | $636,700 | $8,200 | $129,320 | $130,730 | $1,410 |
Regina | $310,600 | $313,100 | $2,500 | $71,440 | $71,850 | $410 |
Fredericton | $290,300 | $292,900 | $2,600 | $67,740 | $68,170 | $430 |
St. John’s | $328,800 | $335,000 | $6,200 | $74,750 | $75,830 | $1,080 |
Toronto | $1,093,900 | $1,113,600 | $19,700 | $214,100 | $217,500 | $3,400 |
Vancouver | $1,183,300 | $1,196,800 | $13,500 | $230,350 | $232,620 | $2,270 |
Victoria | $848,000 | $861,000 | $13,000 | $169,300 | $171,550 | $2,250 |
Winnipeg | $345,400 | $353,600 | $8,200 | $77,770 | $79,210 | $1,440 |
Methodology: Data in the chart is based on a mortgage with a 20% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five banks’ five-year fixed rates in March 2024 and February 2024. Average home prices are from the CREA MLS Home Price Index (HPI).
While this study examines regional affordability based on average home prices and mortgage rates, Canadian mortgage borrowers can calculate just how much of a mortgage they’d qualify for, based on their income, debt ratios and other living expenses. A handy tool, the MoneySense Affordability Calculator, crunches the numbers for you, based on your specific financial situation and location.
It’s also important to keep in mind that today’s interest rate environment is quite volatile. While analysts are increasingly expecting the Bank of Canada to cut its trend-setting overnight lending rate to below 5% this summer, there’s no guarantee when rate relief will actually happen. Those with variable mortgage rates can count on their cost of borrowing remaining stable for the foreseeable future, and that rates will have a slow trajectory downward once cuts do start to occur.
Bond market yields (what lenders use to set the pricing for their fixed mortgage rates) are extremely reactive right now, spiking and falling alongside any new economic data. Most recently, stronger-than-expected inflation reports from both Canada and the U.S. have pushed five-year yields to the 5.7% range, which will put upward pressure on rates.
Given that these rate shifts can have a significant impact on what you’ll pay monthly, today’s rate shoppers should approach the market with a sound strategy. Of course, working with a mortgage broker, who has access to the overall rate picture in Canada, is always a smart idea.
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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