According to a National Bank of Canada report, Canada’s housing affordability has hit the lowest rate in 41 years. This latest data was taken from the 2nd quarter of 2022.

The real estate market has been correcting, and the days of houses selling hundreds of thousands of dollars over their listed price seem to be behind us. With the historically low interest rates of 2020 and 2021, it was not uncommon for several buyers to bid on a property, pushing the sale price above the asking price. Home buyers are now taking their time to sell their existing homes for their asking price before jumping into another purchase. 

The report from the National Bank of Canada looks at the housing market in 10 of the biggest metropolitan areas in Canada. The National Bank of Canada gauges affordability by calculating the mortgage payment as a percentage of income, known as the MPPI rate. 

The report found that the median home price was $810,985 across the ten metropolitan areas, while the typical mortgage payment for a home selling for that price would be $4166, which is an MPPI rate of 63.9% - The highest since 1981. This represents an increase of 10.4% from the previous quarter and 19.1% from the prior year. Historically, the MPPI rate has averaged 40,7% going back to 2000. The primary cause for the deteriorating affordability has been the rising interest rates. 

"While home prices continued to rise in the second quarter, affordability mainly deteriorated on the back of rising mortgage interest rates," the report’s authors wrote. 

The good news is that the affordability rate will likely improve over the last half of the year, as the banks forecast a 10% decline in home prices in the coming months. 

"This development, combined with a stabilization of the benchmark five-year mortgage rate, should improve affordability before the year-end," the report’s authors wrote. 

Are you looking to sell? 

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