Declining prices and a modest drop in borrowing costs reduced the income buyers needed to qualify for mortgages in July from June in 10 of 13 markets in Canada, with Vancouver buyers enjoying the largest drop in house prices, according to a report from Ratehub.ca.
It’s a notable change from June, when affordability worsened in 11 of the 13 markets analyzed by Ratehub.ca.
In July, softer home prices were enough to lower the income needed to qualify in most of the cities studied, said Jamie David, vice-president of mortgages.
“The report illustrates how changing mortgage rates, stress test rates and real estate prices are impacting the income needed to buy a home, as well as the corresponding monthly mortgage payments,” he said. “Ratehub.ca calculates the income buyers need to qualify based on the average-priced home in each market, allowing us to track how changes in home prices and mortgage rates affect affordability month-over-month.”
Vancouver saw the average home price fall by $10,300, followed by Hamilton with a $7,600 decline and in Regina, a decline of $6,600, with Toronto ($6,200), Winnipeg ($6,200) and Montréal ($6,100) rounding out the markets with home price reductions of $6,000 or more.
Calgary’s month-over-month decline was $3,300 while Edmonton had a $1,000 drop.
Monthly mortgage payments dropped $70 in Vancouver, with income required dropping from $226,400 to $223,869; $51 in Hamilton, with income required dropping from $156,800 to $154,950;
Payments dropped $39 in Regina, with income required dropping from $83,479 to $82,929; and dropped $47 in Toronto, with income required dropping from $195,940 to $194,260,160;
Winnipeg had a drop of $38 monthly, with income required dropping from $92,479 to $91,080; the drop was $41 in Montreal, with income required dropping from $129,640 to $128,160;
Calgary had a drop of $26 , with income required falling from $125,770 to $124,840 and; the monthly drop was $11 in Edmonton, with income required falling from $96,400 to $96,050.
“Home price changes were the biggest driver of improved affordability in July.” said David.
Borrowing costs also edged lower, with the average five-year fixed mortgage rate among Canada’s big five banks declining from 4.57% in June to 4.54% in July. This brought the mortgage stress test rate used in Ratehub.ca’s calculations down from 6.57% to 6.54%.
The three-basis-point decrease in the average mortgage rate was relatively small, said David and did not meaningfully contribute to July’s improvement in affordability,
“The average of the big five banks’ five-year fixed rates decreased very slightly, but not enough to meaningfully impact affordability,” he said.
David offers some advice on mortgages.
“If you’re in the market for a home or have an upcoming renewal, it’s worth shopping around and getting familiar with the mortgage rates currently available," he said. "Understanding how different rates and borrowing costs affect your monthly payments can help you determine how much home you can comfortably afford based on your income, down payment, and overall budget."
“As always, consider getting a pre-approval to secure today’s lowest rates for up to 120 days. The lowest five-year fixed rate is currently 4.09%, 10 basis points higher than last month.”
