Rising Home Prices Push Mortgage Affordability Out of Reach for Many Canadians

Buying a home became more challenging for Canadians in February, as affordability declined across most major cities, according to the latest findings from Ratehub.ca.

The report, which analyzes housing affordability in 13 key urban markets, revealed that 11 cities experienced a worsening in mortgage affordability last month. This marks the first broad decline since June of the previous year, signaling renewed pressure on prospective homebuyers.

Only Vancouver and St. John’s managed to see slight improvements, while cities such as Montreal, Toronto, Calgary, and Ottawa recorded notable setbacks. The primary driver behind this shift was not mortgage rates which remained relatively stable but a rise in average home prices.

Mortgage expert Penelope Graham noted that even modest increases in property values had a measurable impact on affordability. Montreal stood out as the most affected market, where home prices rose by $14,300 in just one month. As a result, buyers now need an additional $2,800 in annual income to qualify for a mortgage compared to January. Monthly payments also increased by $76, adding up to nearly $1,000 more per year.

The situation may become even more difficult in the coming months. Global tensions, particularly involving Iran, have pushed oil and energy prices higher. This, in turn, is contributing to rising bond yields an important factor lenders use when setting fixed mortgage rates.

Clay Jarvis, a mortgage expert at NerdWallet Canada, explained that inflation concerns often drive bond yields upward, which directly impacts borrowing costs. As yields increase, lenders adjust their mortgage rates, accordingly, making loans more expensive for consumers.

Adding to the pressure is a significant wave of mortgage renewals currently underway across Canada. The Canada Mortgage and Housing Corporation estimates that by the end of 2025, around 1.5 million households had already renewed their mortgages, with another one million expected to follow in 2026. Many of these homeowners are likely to face higher rates than when they initially secured their loans.

As of February, the lowest available five-year fixed mortgage rate rose to 3.99 percent, while the lowest five-year variable rate stood at 3.35 percent.

With home prices climbing and external economic factors influencing borrowing costs, the outlook for housing affordability in Canada remains uncertain. For many Canadians, entering or staying in the housing market may become increasingly difficult in the months ahead.