Mortgage Rate Stress Test Eases For Canadians In 2024

Purchasing a home might become easier for some Canadians in the near future, according to a recent report from Ratehub.ca.

The minimum income required to purchase an average-priced home fell in all 13 home markets that were examined in the report, thanks to softening mortgage rates that have also reduced the mortgage stress test. The mortgage stress test requires prospective homebuyers to prove that they can afford payments at a higher rate. That rate fell from 8.16% in December to 7.71% in January 2024.

Minimum Income Required To Purchase Home In Canada Falls In 2024

The income required to purchase a home was based on a mortgage with a 20-year downpayment, 25-year amortization, $4,000 in annual property taxes, and $150 per month in utilities. The mortgage rate used was 6.16% for December and 5.71% in January, which amounted to the average of the top Canadian banks during that timeframe. Meanwhile, average home price data was taken from the Canadian Real Estate Association price index.

Prospective homeowners in Victoria got the biggest break with the minimum income required to buy a home falling by 4.4%. Vancouver was next with a 4.04% decline and it also had the biggest overall decline at $9,620.

Even in markets where the average home price increased, the minimum income required to purchase a home still dropped. In Halifax, which saw the biggest monthly increase in home prices, the minimum income requirement still fell by $2,350 to $109,950.

Despite the encouraging news, Ratehub.ca notes that the newfound affordability for potential homeowners could be shortlived. Unfortunately, data from the Canadian Real Estate Association points to national buying conditions tilting back in the favor of sellers and away from buyers.

How To Save For Your First Home In Canada

Economists are expecting the central bank to begin cutting interest rates later this year.

A recent report from Desjardians indicates that lower rates could bring an influx of new buyers to the Canadian home market, which would help home prices rebound in the second half of 2024.

With the time to buy creeping around the corner, many Canadians are looking for ways to save money and buy their first home.

The introduction of the First Home Savings Account (FHSA) allows first-time homebuyers in Canada to save money on taxes and grow their savings tax-free. Investing apps like Questrade are even giving away free cash for Canadians who sign up for an FHSA account. Not only can you receive $50 in free trades just for signing up, but Questrade will also give members $50 in cash for setting up an automatic deposit. That’s a free $100 in value that can be used to buy the best Canadian stocks.

Here’s how to sign up for an FHSA account at Questrade and claim your rewards.