While the Bank of Canada interest rate has dipped over the past few months, home affordability slipped further in January, as rising prices raised the income needed for a mortgage in 12 of 13 major markets, according to a report by Ratehub.
This marks the second month in a row where affordability declined. Prior to the November over December 2024 statistics, affordability was trending positively for a solid five months.
Hamilton led the steepest decline with its average home price rising $20,900 to $819,500 between December and January. As a result, a buyer would now need to earn an additional $4,050 to afford a mortgage on a home at that price. Additionally, the monthly mortgage payment surged $110, to $1,320 per month in January compared to December.
What other real estate markets are seeing price hikes?
Major markets like Toronto and Vancouver saw modest increases in home pricing.
Throughout Toronto, prices surged $8,200 to an average cost of $1,070,100, raising the income requirement by $1,640 and monthly payments by $43.
Meanwhile in Vancouver, the average home price ticked upwards to $1,173,000, an increase of $1,500, as the income needed to purchase a home at this price rose $300 and monthly mortgage payments experienced an uptick of $8.
In contrast, Fredericton was the only market to show improvement in affordability, with home prices dropping by $2,300 to $338,800, as the required income was reduced by $450 and monthly payments by $12.
Mortgage rates were mostly consistent
As a sign of relief, mortgage rates remained largely uninterrupted in January.
While the Bank of Canada cut its benchmark rate by a quarter-point on Jan. 29, fixed mortgage rates held steady with bond yields in the 2.8 to 2.9% range before a brief dip due to bond investor reaction to tariff threats from the US.
It also appears that variable rates will remain unchanged in the next month, as the Consumer Price Index sat at 1.9% in January, a 0.1% increase. This was in large part due to the federal tax holiday that took place from mid-December to mid-February; If this had not been implemented, inflation would have resulted in a year-over-year increase of 2.6%.
This increases the likelihood that the Bank of Canada will pause rate cuts at its March 12 meeting after six consecutive reductions.
This article Is homeownership still a pipe dream? Home affordability slipped further in 12 of 13 major markets, report showsoriginally appeared on Money.ca
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