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Market Insight for November 22
The average income needed to buy a home keeps inching down in cities across Canada, according to the latest data.
Mortgage rates continue to decrease, and in a lot of cities across Canada, real estate prices have also been easing over the past few months.
That means, according to calculations made by Ratehub.ca, the salary needed to purchase a home in Canada has gone down again in October.
The calculation takes into account average home prices in each city as well as the requirements for qualifying for a mortgage at a bank.
The salary needed to buy an average home in Vancouver dropped by the largest amount for the second month in a row, with Toronto close behind.
While both cities experienced a strong boost in sales activity in October, they remain adequately supplied, helping to moderate price growth, as highlighted in the RateHub report. This has created an opportunity for recent interest rate cuts to enhance affordability without being counteracted by escalating home prices.
A reduced mortgage rate makes the mortgage “stress test” simpler to pass. The test applies a rate that is two percentage points higher than the one a buyer is getting from a lender (or 5.25%, whichever is greater) to determine if the buyer can manage a potential increase in mortgage payments.
This evaluation considers the property price, annual income, and other financial obligations and expenses to calculate a ratio representing total monthly debt compared to monthly income.
Effective November 21, 2024, mortgage transfers between lenders will be exempt from requalification. Transactionally insured (those who originally purchased with less than 20% downpayment) and uninsured mortgages (without increasing mortgage balance or amortization) will no longer be required to stress test when changing lenders at maturity. Going forward, only new purchase and refinance mortgage applications must be qualified through the stress test.