Home affordability finds its footing, but rising rates could change that
The average five-year fixed mortgage rate among Canada’s Big Five banks edged just one basis point higher over the month, to 4.55% in August, from 4.54% in July. That’s a move too small to materially affect monthly payments or qualification thresholds. It was declining prices, not rates, doing the heavy lifting.
That pattern tracks closely with what analysts at National Bank of Canada documented in their Q2 2026 Housing Affordability Monitor, which found that Canada’s record streak of consecutive quarterly affordability improvements had become increasingly dependent on falling home values rather than rate relief, a dynamic the bank’s economists cautioned may be approaching its limits.
Toronto led all markets in August, with buyers needing $1,510 less income to qualify for a mortgage on the average-priced home.
“This was due to the home price decrease of $8,700, the biggest change out of all the cities. The Toronto home buyer in this scenario would pay $40 less on their monthly mortgage payment, or $480 per year, in August compared to if they bought in July,” David explained.
David noted that Vancouver and Montréal followed closely behind: “Vancouver and Montréal followed Toronto with $1,130 and $1,110 less income required. These were the three cities that saw the biggest improvements.”
