Housing Affordability Continued to Deteriorate in the Second Half of 2022

Despite declining home prices, higher interest rates continued to erode housing affordability in the third quarter.

National Bank of Canada’s Housing Affordability Monitor deteriorated for its seventh consecutive quarter, making this the longest run of worsening affordability since the 11-quarter streak from 1986 to 1989.

“The magnitude of the deterioration, however, is much more pronounced this time (25.5 percentage points vs. 20.2 percentage points in the 1980s,” the report’s authors wrote. “As a result, the mortgage on a representative home in Canada now takes 67.3% of income to service, the most since 1981.”

In the higher-priced markets of Greater Vancouver and Toronto, mortgage servicing costs now require 102% and 93%, respectively, of the median household income.

While declining home prices are mitigating the erosion in affordability, the 75-bps worth of Bank of Canada rate hikes delivered in the quarter sent the benchmark mortgage rate to its highest level since 2010.

“To give an idea of the scale, all else being equal, a 75-bps increase represents an extra $300 (or an 8.1% increase) on the monthly mortgage payment for a representative home in Canada,” the report reads.

Read the full article from Canadian Mortgage Trends: Housing Affordability Continued to Deteriorate