Income required to buy a home has dropped in major Canadian cities
Do you dream of owning a house? The average home purchase income has decreased in several major Canadian markets.
In June, the Bank of Canada lowered its key interest rate to 4.75%, and in July, it dropped again to 4.5%, the second rate cut of the year. According to a study by Ratehub.ca, an online financial tool, these cuts have lowered the benchmark interest rate from 5% to 4.5 nationwide. As a result, affordability has improved for homebuyers across several Canadian cities.
The average five-year fixed mortgage rate was 5.47% in June and dropped to 5.29% the following month. This means that “income required to qualify for a mortgage fell by more than $5,000 in Canada’s most expensive housing markets.”
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Penelope Graham, mortgage expert at Ratehub.ca, said required income levels dropped in every city included in the study.
“This is the first time since January 2024 that we have seen affordability improve in all 13 cities studied,” said Graham. “Out of the 13 cities studied, five saw home prices increase. However, the drop in interest rates was enough to offset these increases.”
If you live in Toronto or Vancouver, you already know the prohibitive cost of buying a home in Canada’s two most expensive cities. Yet, these two cities saw the most significant drop in required income levels due to a decline in average home prices from June to July.
Ratehub.ca
“Toronto saw the most improvement, with $5,410 less income required to purchase the average home,” explained Graham, who added that the average price of homes in Toronto fell by $13,300.
The study saw a similar trend in Vancouver.
“Vancouver was close behind, with $5,020 less income required to purchase the average home and a home price decline of $9,400, again reflecting dropping sales due to affordability ceilings in Canada’s most expensive markets,” she said.
However, while these changes are being felt in bigger cities, residents in smaller Canadian cities haven’t been as lucky.
Fredericton, New Brunswick | St. John’s, Newfoundland and Labrador (Danita Delimont/Shutterstock | Introspective Design/Shutterstock)
In Fredericton, New Brunswick, required income levels dropped by a mere $210, from $70,230 to $70,020. Homes in this city have become significantly more expensive, with a sharp increase from $308,200 in June to $311,800 in July, a difference of $3,600.
Out of the 13 cities in the study, St. John’s, Newfoundland and Labrador, saw the smallest drop in required income levels — just $160 less, from an average income of $76,880 to $76,720. The cost of homes in the city jumped by $4,500 in one month, from $345,200 to $349,700.