real estate financing

If your home ownership dreams have been put on hold, there may be hope on the horizon as Canada’s falling interest rates are impacting how much income is needed to purchase a property. But depending on where you live, it still requires a hefty paycheque to enter the market. According to a new report from Ratehub.ca, the income needed to afford a home has fallen in 12 of 13 cities across the country. This comes after the Bank of Canada (BoC) announced a massive interest rate cut in October. The BoC dropped the rate by 50 basis points, bringing it from 4.25% to 3.75%, which many referred to as a “jumbo-sized” drop. This was the fourth announcement of 2024, and such a low rate hasn’t been seen since December 2022. According to Ratehub.ca’s Penelope Graham, “affordability conditions have been improving since June, when the Bank of Canada first started cutting its benchmark interest rate, easing mortgage costs and the pricing of other borrowing products.” RateHub Vancouver and Toronto, Canada’s most expensive cities, saw the most significant drops in the income needed to purchase a home between September and October 2024. “While both of these cities saw a robust increase in sales activity in October, they remain well supplied, which has helped keep a lid on price growth,” notes the report. Still, prospective buyers in these cities need to take home significant paycheques to get into the housing market. The income required to purchase the average home in Vancouver now stands at $214,000 annually. In Toronto, it’s slightly lower at $195,420. Moreover, Canada’s smaller cities haven’t experienced the softer prices of their larger counterparts. A drop in supply and an increase in buyer activity have resulted in prices going up, as six out of 13 markets across the country saw month-over-month price hikes. Fredericton was the only market where affordability deteriorated between September and October as home prices increased by $16,100, meaning buyers would need $1,890 more income to purchase an average property. Ratehub.ca provided an optimistic outlook for prospective buyers over the next few months as mortgage rates are expected to drop further. The overnight lending rate is predicted to drop by another 25 basis points, bringing the benchmark interest rate to 3.5%. Rates are expected to drop further in 2025. However, lower rates will likely lead to an uptick in prices as more buyers could enter the market. “The national average home price is expected to end the year largely flat at $683,200 – just a 0.9% increase – before rising 4.4% next year to $713,375,” concluded Ratehub.ca.