An average household needed to allocate 55.9% of its income to cover mortgage payments, property taxes and utilities in Q4. That’s down from an all-time high of 63.8% a year earlier, says a new RBC report.
Key findings from the Housing Affordability report:
- The decline only partly restored the massive loss of affordability during the pandemic. RBC’s affordability measures are still at exceptionally stretched levels nationally. In many major markets, most Canadians face extremely challenging conditions for buying a home.
- Lower mortgage rates brought relief from coast to coast. Interest rate cuts drove down RBC’s measures in all markets we track in Q4. (A decline in the measure represents a gain in affordability.) Toronto and Vancouver recorded the largest drops.
- Further improvement will likely come in 2025, but it could be overshadowed by trade. We see the Bank of Canada cutting its policy rate until mid-year—which should continue to take a load off ownership costs. But such a market friendly development may not spur potential buyers into action if U.S. tariff-related uncertainty significantly erodes confidence. The trade war is likely to loom large over the market near term.
“Last year’s monetary policy pivot was a turning point for affordability in this country. The drop in fixed mortgage rates—which started before the BoC’s first cut in June as financial markets anticipated the shift—set mortgage payments associated with a home purchase on a downward course following three years of rapid escalation,” said the report.
“Lower rates accounted for more than four-fifths of the 7.7 percentage-point decline in RBC’s national composite affordability measure since Q4 2023. Household income gains explained the remainder.
“Cheaper borrowing costs moved the needle lower in every part of Canada—generating larger savings in the pricier markets (Toronto, Vancouver and Victoria).
“The turning point couldn’t have come soon enough. Skyrocketing prices between 2020 and early-2022, and then soaring interest rates as the BoC fought inflation caused ownership costs to balloon to crisis levels by the end of 2023.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.
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