Interest Rate Hikes Eroding Housing Affordability

Silverman Mortgage | July 10, 2018

After improving slightly late last year, housing affordability has now reached “crisis levels” in Vancouver and is posing a “tremendous challenge” in Toronto.

That’s the assessment from RBC’s latest Housing Trends and Affordability report, which says higher interest rates are the main reason for a deterioration in affordability right across the country.

“The winning streak for housing affordability in Canada ended,” the report reads, noting the aggregate affordability measure for Canada rose by 0.4 percentage points to 48.4% in Q1. “This rise entirely reversed the slight 0.3 percentage-point decline recorded in the previous quarter—the first decline in 10 quarters.”

Unsurprisingly, Toronto and Vancouver led the way as the country’s least affordable markets.

In Vancouver it takes 87.8% of household income to cover the costs of home ownership, the report said, while in Toronto that percentage is 74.2%. Compare that against the national average of 48.4%, or 43.7% in Montreal, 43% in Calgary and just 28% in Edmonton.

“[Affordability] is at crisis levels in Vancouver and poses a tremendous challenge for many Toronto-area buyers despite improving in the past two quarters,” the report noted.

Overall, higher interest rates were cited as the main factor for sending homeownership costs to a multi-decade high, while the situation was amplified in both Vancouver and Victoria due to a return to appreciating prices.

Although affordability in Toronto remains a concern, the report noted that it was one of only two markets, along with Winnipeg, to see a small improvement.

“The main reason was that home prices fell enough in both markets to counteract the effect of higher interest rates,” RBC noted. “In the case of the Toronto area, the mortgage stress test that came into effect in January added further downward pressure on property values—which were still adjusting to last year’s Fair Housing Plan implemented by the Ontario government.”

But that may not be the case for much longer, as the Toronto Real Estate Board’s latest datashows the average price of a home in the Greater Toronto Area climbed to a 13-month high in June—up 2 percent year-over-year to $807,871.

National Bank publishedsimilar findings to RBC recently in its Housing Affordability Monitor. It noted that the mortgage payment on a representative home as a percentage of median income rose by 1.2 points—the 11th straight month that this metric had increased.

Given the limited capacity for Vancouver and Toronto homebuyers to put more of their income towards housing than they already are, the National Bank report concluded that prices could start to decline should interest rates continue to increase.

“Since we don’t see how Vancouver and Toronto homebuyers could pay a higher share of their incomes for shelter, a downward adjustment of prices is conceivable,” the authors write. “If our scenario for interest rates out to the end of 2019 materializes (+75 basis point on the 5-year mortgage rate), and assuming historically average income growth, prices would need to fall on the order of 2% to keep home affordability from deteriorating further.”


This article was written by Steve Huebl and was originally published on Canadian Mortgage Trends on July 5th 2018.

RECENT POSTS

How to Finance a Spousal Buyout After Separation or Divorce

By Zach Silverman • September 9, 2026
Mortgage Options During Divorce or Separation: What You Should Know If you’re going through—or considering—a divorce or separation, you may not realize that there are mortgage solutions specifically designed to help one party keep the home . For many people, the family home is their largest asset and where most of their equity is tied up. In situations like this, a spousal buyout program can allow one person to refinance the property and buy out the other party’s share—often up to 95% of the home’s value . This option can work whether you want to keep the home or your former partner does. What Is the Spousal Buyout Program? The spousal buyout program is a refinancing option that allows one owner to purchase the other owner’s share of the property as part of a separation or divorce settlement. In some cases, it can also be used to pay off jointly held debts, as outlined in a legal agreement. Below are some of the most common questions about how the program works. Is a finalized separation agreement required? Yes. Lenders require a signed and finalized separation agreement that clearly outlines how assets and debts are to be divided. This document is essential for approval. Can the funds be used for renovations or personal debts? No. Funds from a spousal buyout can only be used to: Buy out the other owner’s share of equity Pay off joint debts specifically listed in the separation agreement They cannot be used for renovations, personal loans, or unrelated expenses. How much equity can be accessed? The maximum amount available is the amount required to: Buy out the other party’s agreed-upon share of equity Pay off any joint debts listed in the agreement This amount cannot exceed 95% loan-to-value . What is the maximum loan-to-value allowed? The maximum loan-to-value is the lesser of : 95%, or The remaining mortgage balance plus the required buyout and joint debt payout The property must be the primary owner-occupied residence . Do all parties need to be on title? Yes. All individuals involved in the buyout must currently be registered on title. Your solicitor will confirm this through a title search. Does this only apply to married or common-law couples? No. While commonly used for married or common-law couples, the program may also apply to siblings or friends who jointly own a property and need one party to exit the mortgage. These cases are typically reviewed on an exception basis and require insurer approval. If no separation agreement exists, the purchase contract must clearly outline the buyout terms. Is a full appraisal required? Yes. A physical, on-site appraisal is required to confirm the property’s value before the mortgage can be finalized. Final Thoughts This overview covers some of the most common questions about mortgage options during separation or divorce, but every situation is different. Working with an independent mortgage professional gives you access to multiple lenders, specialized programs, and unbiased advice—so you can clearly understand your options and choose what’s best for your future. If you’re navigating a separation and need guidance around keeping or selling the home, feel free to connect anytime. All conversations are handled with discretion and confidentiality, and I’d be happy to walk you through your options.

Bank of Canada Holds Rate at 2.25% — September 2, 2026

By Zach Silverman • September 2, 2026
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. While Canada's economic recovery is broadening, a new layer of uncertainty has entered the picture. Here is what happened and what it means for your mortgage.

How to Legally Assign a Construction Mortgage

By Zach Silverman • August 26, 2026
Why More Mortgage Options Matter—Especially for Assignment Purchases One of the biggest advantages of working with an independent mortgage professional is access to choice. Instead of being limited to one lender and one set of products, mortgage brokers work with multiple lenders—each with different guidelines, risk tolerances, and mortgage solutions. That flexibility becomes especially valuable when your situation doesn’t fit neatly into a “standard” box. A great example of this is purchasing new construction through an assignment contract . Why Assignment Purchases Can Be Challenging Assignment purchases are often viewed as higher risk by traditional lenders. Rather than declining these deals outright, many lenders quietly make them difficult by adding layers of conditions, restrictions, or uncertainty. This can lead to delays, frustration, or financing falling apart late in the process. The Good News There are lenders—available exclusively through the broker channel —that have clear, favourable policies for assignment purchases. With the right lender and proper planning, these transactions are absolutely doable. Typical Financing Requirements for Assignment Purchases While every situation is unique, many lenders that allow assignment financing look for the following: Standard purchase qualification, including income verification, credit, and down payment Assignments accepted at either the original purchase price or current market value Minimum 620 credit score , with no prior bankruptcies or consumer proposals The full down payment must come from the purchaser —seller incentives cannot be used Required Documentation To secure financing, lenders typically require: The original purchase agreement signed by all parties The MLS listing (if applicable) The assignment agreement signed by the builder, original purchaser, and new buyer Any side agreements outlining changes to the purchase price A full appraisal to confirm value This list isn’t exhaustive, but it highlights that while assignment purchases require more coordination, they are very achievable with the right lender and guidance. Final Thoughts Assignment contracts can open doors to great opportunities—but only if your financing supports the transaction. This is where access to multiple lenders and specialized policies makes a real difference. If you’re considering purchasing new construction through an assignment, or if you’d like to explore more traditional purchase options, feel free to connect anytime. I’d be happy to walk you through the mortgage products available and help you choose an option that doesn’t limit your financing possibilities.