Interest Rate Hikes Eroding Housing Affordability

Marci • July 13, 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 data shows 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 published similar 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. 

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Everything You Need to Know About Second Mortgages

By Marci Deane • May 6, 2026
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.

Bank of Canada Holds Rate at 2.25% — April 29, 2026

By Marci Deane • April 29, 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%. This decision comes against a backdrop of significant global uncertainty — and for Canadian homeowners, buyers, and anyone with a mortgage coming up for renewal, here's what it means.

Your Guide to Successfully Navigating the Housing Market

By Marci Deane • April 22, 2026
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.