Prospective home buyers across Canada faced a surprising trend in January, as a new report indicates that most major markets required less income to qualify for a mortgage, despite rising home prices in certain cities. This analysis, conducted by Rates.ca, surveyed 13 markets, including Calgary, and found that income thresholds dropped in all but one location.
Study Methodology and Key Findings
The report utilized a standardized approach, calculating the income needed to qualify for a mortgage on an average-priced home. It assumed a five-year, fixed-rate mortgage at an average interest rate of 4.4 percent, with a 10 percent down payment and a 25-year amortization period. Additionally, the federal stress test was applied, raising the qualifying rate to 6.4 percent, which is 200 basis points above the offered rate.
Market-Specific Insights
In Calgary, the average home price increased by $700 to $555,500 in January. However, the monthly mortgage cost fell by $14 to $2,824, and the annual income required dropped by $450 to $120,150. This decrease is largely attributed to a slightly lower interest rate of 4.4 percent, compared to 4.46 percent in December.
Vancouver experienced the most significant decline, with the required income falling by $3,600 to $223,700 annually. This corresponds to an average home price of $1,101,900, which decreased by $12,900 from December, and a monthly mortgage cost reduction of $100 to $5,602.
Regina stood out as the most affordable market, requiring the least income at $77,540 in January, down $400 from December. The average home price there was $330,600, declining by $300, with a monthly mortgage cost of $1,681, a drop of $12.
Exception in Montreal
Montreal was the sole exception in the study, where the income requirement rose by $680 to $124,800 in January. This increase aligns with an average home price of $579,900, up $6,600 from December, and a monthly mortgage cost growth of $16 to $2,948.
Implications for Home Buyers
These findings suggest that, despite ongoing price increases in some regions, favorable interest rates and market adjustments are making homeownership more accessible for many Canadians. The data highlights a nuanced real estate landscape where affordability can improve even as property values climb, offering potential opportunities for prospective buyers in most surveyed cities.
