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Housing Affordability Improving, But Rising Prices Could Change That

Feb. 12, 2021
5 mins
Couple in modern living room at home

The explosion in home values last year was accompanied by a collapse in mortgage rates. And it’s a good thing, because surging home prices hurt mortgage affordability.

But as prices across the country continue to mount, even low interest rates won’t make the unaffordable affordable.

“Higher incomes and record-low interest rates were almost completely offset by a substantial rise in home prices [in the fourth quarter],” economists with National Bank of Canada (NBC) wrote in their latest Housing Affordability Monitor. The noted prices for the 10 urban centres they track rose 4.5% from Q3, making it the largest quarterly gain in 11 years.

The report showed a third consecutive quarter of improvement in affordability, at least on a national level. Some markets, however, are in the affordability danger zone, including Ottawa, Montreal and Toronto.

Here’s a quick look at the income needed to afford homes in those hotspots vs. the national average, along with the length of time it would take to save up a minimum down payment (~6%). The figures below are from the Q4 Teranet-NBC Housing Affordability Monitor and encompass all housing types, including condos.


  • Median house price: $975,143 (+10.9 Y/Y)
  • Household income required: $193,756
  • Months of saving for a down payment: 101
  • Mortgage payment as a percentage of income: 54.6% (based on a median income of $86,179)


  • Median house price: $505,229 (+18.2%)
  • Household income required: $102,973
  • Months of saving for a down payment: 33.8
  • Mortgage payment as a percentage of income: 26.9% (based on a median income of $90,625)


  • Median house price: $411,974 (+14.8%)
  • Household income required: $84,012
  • Months of saving for a down payment: 35.9
  • Mortgage payment as a percentage of income: 28.8% (based on a median income of $68,931)

National (10-city urban composite)

  • Median house price: $632,044 (+9.1%)
  • Household income required: $127,472
  • Months of saving for a down payment: 59.8
  • Mortgage payment as a percentage of income: 39.7% (based on a median income of $76,720)

At current home price levels, mortgages are already increasingly difficult to qualify for in many urban markets, particularly for first-time buyers. As the data above illustrates, the household incomes and down payments needed to qualify are rising to levels out of reach for many hopeful homeowners.

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Find a mortgage broker

Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.

Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.

The down payment hurdle

One of the biggest obstacles for first-time buyers is saving up the down payment needed for a purchase.

“At a national level, there has never been a worse time to accumulate the minimum down payment,” NBC’s economists wrote. “Assuming a savings rate of 10% of total median household income, it would now take 60 months (5 years) to save for the minimum down payment (approximately 6%) on the representative home.”

In higher-priced markets, it’s now practically impossible for those with modest means to save up the required down payment. The average in time it takes to save up a down payment for a “non-condo” home in Toronto has grown to 289 months (24 years), and a whopping 409 months (34 years) in Vancouver.

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With these kinds of waiting times (to save a down payment), first-timers are increasingly making tough choices: buy a shoebox in the city, get more space in the suburbs or rent.

And that last option is looking pretty dicey given home prices don’t appear to be going on sale. It’s reports like these that keep real estate FOMO alive and well.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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