For much of 2022 and 2023, rising mortgage rates overwhelmed mortgage borrowers. Home prices peaked, variable-rate mortgage borrowers faced significantly higher monthly costs and new borrowers struggled to qualify at higher rates.
Fast forward to today, and affordability has improved meaningfully because of two main factors:
- Canadian mortgage rates have decline materially since the fall of 2023.
- Quick Answer: Has Housing Affordability Improved in Canada?
Yes, housing affordability in Canada has improved significantly since mortgage rates peaked in October 2023. In Toronto, the income required to qualify for an average home has fallen from approximately $281,000 to $203,000, while monthly mortgage payments are approximately $2,481 lower. Affordability is even better in markets where prices have increased. For example, in Halifax, lower mortgage rates have largely offset rising house prices, keeping affordability relatively stable.
Quick Answer: Has Housing Affordability Improved in Canada?
Yes, housing affordability in Canada has improved significantly since mortgage rates peaked in October 2023. In Toronto, the income required to qualify for an average home has fallen from approximately $281,000 to $203,000, while monthly mortgage payments are approximately $2,481 lower. Affordability is even better in markets where prices have increased. For example, in Halifax, lower mortgage rates have largely offset rising house prices, keeping affordability relatively stable.
Key Takeaways:
- Fixed mortgage rates have fallen from 5.69% to 3.99%;
- National home prices are down, lead by Toronto where average Toronto home prices are down roughly 20% from peak levels;
- Monthly payments on the average Toronto home are about $2,482 lower than in October 2023, when mortgage rates peaked;
- The income required to qualify for the average home in Toronto has declined by approximately $78,000;
- Other market vary depending on the extent of the price decline, but even in markets where prices have increased, affordability has improved due to lower mortgage rates.
Let’s look at the numbers.
Canadian National Housing Prices: October 2023 vs. Today
In early 2022, the Canadian national average house price peaked at about $826,800.
The latest Canadian national average house price, as of June 2026, is approximately $696,078
This is a 16% decline in average Canadian house price since 2022. There are some markets where prices are higher since early 2022, for instance Halifax (up approximately 13%), Saskatoon (up approximately 11%), and Quebec City (up approximately 12%). The national average Canadian house price was weighed down by the declines in larger market, primarily Toronto (down approximately 20%) and Vancouver (down approximately 13%).
Canadian mortgage rates peaked in October 2023. At that time, the best 5-year insured, Canadian fixed mortgage rate was 5.69%. Today, that same best rate is 3.99%.
While the decline in average Canadian house prices is welcome news to potential homebuyers, the decline in borrowing costs has also had a significant effect on housing affordability.
Monthly Payment Comparison
Canadian mortgage rates have declined materially since their peak in October 2023. That month, the best five-year insured Canadian mortgage rate was 5.59%. Today (July 2026) that same Canadian mortgage rate is 3.99%. Similarly for variable mortgage rates, they peaked at 6.10% in October 2023 and are now down to 3.40% in July 2026. We will use Canadian fixed mortgage rates for the comparison. We will also assume an insured mortgage with a 5% down payment.
We ran two scenarios. One using Toronto as the market to show the improvement in affordability where Toronto house prices have declined. And one using Halifax as the market to show how Halifax mortgage affordability has improved even though house prices have increased.
October 2023 – Toronto Scenario
Average home price: $1,334,544 (CREA data)
Assumptions:
- 5% down payment
- Mortgage amount: $1,267,817*
- 25-year amortization
- 5.69% mortgage rate
- Note that insured mortgages were not permitted on properties valued over $1 million until December 2024. For simplicity we assume an insured mortgage in 2023 so we can compare apples-to-apples (plus, the CMHC rule is part of the improvement in affordability and should not be ignored)
Monthly payment: approximately $7,879
July 2026 – Toronto Scenario
Average home price: $1,081,375
Assumptions:
- 5% down payment
- Mortgage amount: $1,027,306
- 25-year amortization
- 3.99% mortgage rate
Monthly payment: approximately $5,398
October 2023 – Halifax Scenario
Average home price: $599,016
Assumptions:
- 5% down payment
- Mortgage amount: $501,600
- 25-year amortization
- 5.69% mortgage rate
Monthly payment: approximately $3,117
July 2026 – Halifax Scenario
Average home price: $528,000
Assumptions:
- 5% down payment
- Mortgage amount: $569,065
- 25-year amortization
- 3.99% mortgage rate
Monthly payment: approximately $2,990
The Surprising Result
The significant increase in affordability in Toronto is not that surprising. Both house prices and mortgage rates are lower, so that would be the obvious result. The scale of the improvement in house affordability may surprise many though.
Equally surprising is the fact that despite Halifax having 13% growth in house prices since October 2023, housing affordability is better because of the lower mortgage rates. A home buyer in Halifax can buy the same house today as someone in October 2023 and end up with a lower mortgage payment.
| City | Date | Avg Home Price | Mortgage Rate | Monthly Mortgage Payment | Monthly Savings | Savings Over 5 Years |
|---|---|---|---|---|---|---|
| Toronto | Oct 2023 | $1,334,544 | 5.69% | $7,879 | ||
| Toronto | July 2026 | $1,081,375 | 3.99% | $5,398 | $2,481 | $148,860 |
| Halifax | Oct 2023 | $528,000 | 5.69% | $3,117 | ||
| Halifax | July 2026 | $599,016 | 3.99% | $2,990 | $127 | $7,620 |
The benefit of lower house prices and lower rates can be seen in the Toronto results. On the mortgage financing alone, the savings are $148,860 over five years. Add to this the fact that the prices are down 20% and the savings are massive. Affordability in Toronto is dramatically better than it was when house mortgage rates peaked.
Halifax is an interesting comparison. Even though prices are up, a mortgage borrower can pay $7,620 less for a home today than they would have in October 2023. It does not make up for the full price difference, but it shows that the math is not simply just comparing prices between periods. The cost to carry the five-year in Halifax mortgage is over $7,000 lower today, even with the higher price.
How Much Income Do You Need to Qualify for a Mortgage in Canada?
Monthly payments are only part of the story.
To qualify for an insured or insurable mortgage, borrowers must pass the federal mortgage stress test. That math determines the minimum household income required to qualify for a mortgage. Once again, we will use Toronto and Halifax to demonstrate the math.
October 2023
For the average Toronto home price of $1,334,544 at a mortgage rate of 5.69% (qualifying rate of 7.69% under the mortgage stress test) the income required to purchase the average home in Toronto was $281,000.
For the average Halifax home price of $599,016 at a mortgage rate of 5.69% (qualifying rate of 7.69% under the mortgage stress test) the income required to purchase the average home in Halifax was $111,000.
Today
Toronto housing affordability has improved. For the average Toronto home price of $1,081,375 at a mortgage rate of 3.99% (qualifying rate of 5.99% under the mortgage stress test) the qualifying income needed to buy the average home in Toronto is $203,000.
Halifax housing affordability remains the same, despite higher house prices. For the average Halifax home price of $528,000 at a mortgage rate of 3.99% (qualifying rate of 5.99% under the mortgage stress test) the qualifying income needed to buy the average home in Halifax is $112,000.
The qualifying income needed to purchase an average home in Toronto is now approximately $78,000 lower than at the peak of mortgage rates in October 2023, potentially expanding homeownership eligibility to an additional 10–15% of Toronto households. Let’s be clear, the income required for the average Toronto home is still above the average household income, so the city is still expensive. However, the situation has improved, and more people can qualify today than in 2023.
The qualifying income needed to purchase an average home in Halifax is almost the same, only $1,000 higher than at the peak of mortgage rates in October 2023, despite house prices being 13% higher. Lower mortgage rates have offset the increase in house prices for Halifax homebuyers.
Why Housing Affordability Has Improved in Canada
1. Interest Rates Have Fallen
This is by far the biggest factor.
Mortgage rates are the largest determinant of monthly affordability. A drop from roughly 5.69% to 3.99% produces a material financing savings that can offset any price gains. Couple with price declines in larger markets like Toronto and Vancouver, the benefit is significant.
2. The Stress Test Has Become Less Restrictive
When rates peaked, many otherwise good homebuyers were shut out because they could not qualify at rates near 8%.
Today, qualification rates are materially lower, closer to 6%, allowing households to qualify for more financing.
3. Buyers Have More Certainty
It is not just the absolute level of rates that matters, it is also the confidence that market participants have in how stable rates are at any point in time. In late 2023, many consumers worried rates would continue rising. At the time, the Canadian Real Estate Association (CREA) noted that buyers had largely moved to the sidelines and activity had slowed considerably.
Today, mortgage rates are lower, and the interest-rate environment is more stable, giving buyers greater confidence. In its July report, the CREA stated, “The last couple months have seen the return of more certainty around both interest rates and home values, along with an increasing number of buyers in the market.”
Add to this the fact that incomes have grown since 2023 and the situation has improved materially.
The Bottom Line
While headlines often focus on home prices, monthly affordability is what matters to most homebuyers.
Since mortgage rate peaked in October 2023:
- Average home prices have declined nationally, although some markets have seen price increases.
- Competitive 5-year insured, fixed mortgage rates have fallen by roughly 1.8%
- Competitive 5-year insured, variable mortgage rates have fallen by roughly 2.7%
- Monthly mortgage payments on the average home are approximately 15% lower.
- The income required to qualify in large markets like Toronto and Vancouver has declined by approximately 30% due to the combination of lower house prices and lower mortgage rates.
- The income required to qualify has fallen even in markets where prices have increased, such as Halifax.
In other words, mortgage affordability is dramatically better. Affordability may still be stretched for many potential buyers, but the truth is that is not unusual in any housing market. The typical Canadian buyer is in a meaningfully better affordability position today thanks to lower mortgage rates and lower national home prices. If you want to check on your own mortgage affordability please see Frank Mortgage’s Mortgage Affordability Calculator here - Affordability Calculator
It appears that house prices are stabilizing somewhat, but there still is a chance that they slide a bit further. Mortgage rates have levelled off. Most analysts think the probability of rates rising in the future are higher than the probability of rates going lower. The improvement in affordability may slow down now given the relative stability in both the mortgage and housing markets. If the numbers work for you, why not consider entering the market. Reach out to us at Frank Mortgage and let us run the numbers for you!
Frequently Asked Questions About Housing Affordability in Canada
Has housing affordability improved in Canada?
Yes. Housing affordability has improved in many Canadian markets since mortgage rates peaked in October 2023. While home prices have not fallen everywhere, lower mortgage rates have significantly reduced monthly payments and improved mortgage qualification thresholds. In some markets, affordability has improved even when home prices have increased because financing costs have declined more than enough to offset higher prices.
Why has affordability improved even though some home prices have risen?
Mortgage rates have a significant impact on affordability because they directly affect monthly payments and mortgage qualification. A lower interest rate reduces borrowing costs, which can have a greater effect on affordability than a moderate increase in home prices.
For example, in Halifax, average home prices increased between October 2023 and July 2026, but monthly mortgage payments still declined because mortgage rates are down substantially during the same period.
Is housing more affordable today than it was when mortgage rates peaked?
For many buyers, the answer is yes.
At the peak of mortgage rates in October 2023, buyers faced both elevated borrowing costs, restrictive mortgage qualification requirements, and higher house prices. Today, lower mortgage rates have reduced monthly carrying costs and the income required to qualify for a mortgage under Canada’s mortgage stress test.
As a result, many households that could not qualify in 2023 may be able to qualify today.
How much income do you need to buy an average home in Toronto today?
Using the assumptions in the foregoing analysis – a 5% down payment, a 25-year amortization, and qualification based on Canada’s mortgage stress test - the estimated income required to qualify for an average Toronto home is approximately $203,000 per year.
In October 2023, the estimated qualifying income for the average Toronto home was approximately $281,000 per year.
That represents a reduction of approximately $78,000 in required annual qualifying income.
How much income do you need to buy an average home in Halifax today?
Using the same assumptions, the estimated income required to qualify for an average Halifax home is approximately $112,000 per year.
Although mortgage rates have fallen since 2023, rising home prices have largely offset the affordability gains from lower financing costs, leaving qualification requirements relatively unchanged.
What is Canada’s mortgage stress test?
Canada’s mortgage stress test requires borrowers to qualify at a higher interest rate than the rate they will actually pay.
Generally, borrowers must qualify at the greater of:
- Their contract mortgage rate plus 2%, or
- The minimum qualifying rate established by federal regulators (currently 5.25%).
The purpose of the stress test is to ensure borrowers can continue to afford their mortgage if interest rates rise in the future.
Why is the mortgage stress test important when measuring affordability?
The mortgage stress test determines whether a buyer can qualify for a mortgage, not just whether they can make the monthly payment.
A buyer may be comfortable with today’s mortgage payment but still fail to qualify if their income is insufficient under the stress-tested rate. For this reason, qualifying income is often a more meaningful affordability measure than monthly payment alone.
Is it easier to qualify for a mortgage today than it was in 2023?
In most Canadian housing markets, the answer is yes.
Lower mortgage rates mean borrowers are tested at lower qualifying rates under the mortgage stress test. Combined with lower home prices in some markets, this has significantly reduced the income required to qualify for a mortgage.
Toronto is a notable example, where the estimated qualifying income for an average home has fallen by approximately $78,000 compared with October 2023.
Are lower mortgage rates more important than lower home prices?
Both matter, but mortgage rates often have a larger short-term effect on affordability.
A modest change in interest rates can alter monthly payments by hundreds or even thousands of dollars per month. As a result, falling rates can sometimes improve affordability even when home prices remain elevated or continue to rise.
Does improving affordability mean homeownership is now affordable for everyone?
The answer is no.
Even with recent improvements, affordability remains a challenge in Canada’s largest cities. Housing costs, down-payment requirements, household debt levels, property taxes, and the mortgage stress test continue to create barriers for many buyers.
However, compared with the conditions that existed when mortgage rates peaked in 2023, the path to homeownership has become substantially more attainable for many Canadians.
