A slight drop in home prices and lower mortgage rates in the third quarter have led to an improvement in Canadian affordability, shows the Desjardins Affordability Index (DAI).
The improvement in affordability stems from faster income growth and the drop in mortgage rates. An improvement by the DAI therefore indicates that it’s less onerous for households to pay for a property.
Since last July, the federal government’s more stringent mortgage rules have, however, reduced some borrowers’ financial leeway, skewing the DAI’s interpretation in the third quarter.
The third quarter DAI did not improve as much in Quebec, as prices advanced 1.5% from the second quarter to reach an average of around $275,000. On the other hand, the quarterly drop by Ontario home prices was similar to Canada’s, at about 1%. The DAI rose to 126.9 in the third quarter.
Ontario residents’ average disposable income is thus 26.9% higher than the income mortgage lenders require to finance the purchase of a home for the average price of $385,972.
Like elsewhere in the country, sales of existing homes have begun to turn around since the new rules came into effect.
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