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2023 marks a “terrible” year for home affordability

2023 year-in-review affordability report

Stubbornly high mortgage rates made for a “terrible” year for borrowers and prospective home buyers, as affordability declined across the country over the course of 2023.

According to year-in-review data compiled by, buying conditions deteriorated in each of the 10 major Canadian cities studied. The report illustrates how changing mortgage and stress test rates, combined with real estate prices, impact the minimum income required to qualify for a mortgage in each market.

The most challenging market is Vancouver, where the income to purchase a home rose by $24,600, to a total of $237,400. The city’s average price hit $1,168,700 in December, an increase of $57,300 since the start of the year.

In second place was Calgary, where the required income rose by $14,770 to $120,450. Home prices there increased by a whopping $44,600 over the course of 2023, to an average of $554,500.

Compounding on rising prices in most markets was the persistently high mortgage stress test, which steadily rose over the course of the year from the 7% range to 8.16% today (based on an average fixed mortgage rate of 6.18%).

“This was a terrible year for home affordability in Canada; mortgage rates went up, driving the stress test higher and homes were more expensive in seven out of 10 cities,” says James Laird, Co-CEO of and President of CanWise mortgage lender. 

“The income required to purchase a home increased significantly in all 10 cities. The income required ranged from an extra $5,610 in Winnipeg all the way up to an additional $24,600 in Vancouver.”

Affordability declined even in markets where the average home price decreased, due to the impact of steep mortgage qualification.

“The cities where home values dropped were Toronto, Victoria and Hamilton, yet all three were still less affordable due to rising mortgage rates,” adds Laird.

2023 year-in-review home affordability report 2023 year-in-review mortgage income reportData in the chart is based on a mortgage with 20% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in 2023. Average home prices are from the CREA MLS® Home Price Index (HPI).

Home affordability in 2024 hinges on rate direction

Borrowers have been waiting with bated breath to see if mortgage rate relief is on the horizon in 2024. The commentary in the Bank of Canada’s December announcement indicated that slowing inflation has given the central bank room to hold rates for the near future, with growing optimism among economists that rate cuts could be in store as early as the spring.

However, fears are growing that inflation progress may be short-lived; the latest CPI numbers for December revealed year-over-year headline growth of 3.4%, with the core measures hitting 3.6 and 3.7%. That’s injected fresh unease into markets, as central banks may need to stick to their “higher for longer” stance. Markets are now pricing in 74% odds of a rate cut in April, down from 87% prior to this week’s CPI report, according to Refinitiv Eikon data.

With the Bank of Canada’s next interest rate announcement scheduled for January 24th, all eyes will be closely scrutinizing the included language to gauge the Bank’s current comfort level with inflation, and whether or not it needs to be "prepared to raise the policy rate further if needed." 

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Penelope Graham, Director of Content

Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.