Affordability conditions worsened in all Canadian housing markets in May
Ratehub.ca May 2026 Home Affordability Report
Key takeaways
- A combination of rising home prices and mortgage rates worsened affordability conditions in May.
- St. John’s saw affordability worsen by the largest degree.
- Large markets, such as Toronto and Vancouver, are showing signs of rebounding buyer demand and price growth.
Canadian home buyers looking to buy a home may find their affordability window closing; the latest data from Ratehub.ca shows that in May, it became tougher to purchase a home in all major markets across the country.
The study, which is conducted monthly, gauges how affordability conditions are evolving in real time, across 13 of Canada’s largest markets. It defines affordability based on the amount of income a borrower would need to earn to qualify for a mortgage on the average-priced home in their local market, based on national real estate data, changes to mortgage rates, as well as the mortgage stress test.
Home prices and mortgage rates both rose in May
In May, buying conditions started to firm up across Canada, putting slight upward pressure on prices; according to the Canadian Real Estate Association, real estate transactions rose by 5.5% from April, and the national average home price rose above $700,000 for the first time in almost two years.
Mortgage rates also rose slightly in May – the Ratehub study shows that the average five-year fixed rate across Canada’s big banks increased to 4.49%, up from 4.47% in April. The mortgage stress test rate, which adds two percentage points to whatever contract rate a borrower gets from their bank, also rose to 6.49%.
While just a slight uptick from April, the combination of higher prices and rates was enough to erode overall affordability.
Here’s how this played out across Canada.
May 2026: How much did you need to earn to buy a home in Canada?
This report is for illustration purposes only. Data is based on a mortgage with a 10% 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 May 2026 and April 2026. Average home prices are from the CREA MLS® Home Price Index (HPI).
According to the data, St. John's saw the biggest increase with $2,800 in additional income required to purchase the average home. The St. John's borrower in this scenario would pay $75 dollars more on their monthly mortgage payment, or $900 per a year, in May compared to if they bought in April.
Montréal, meanwhile, saw the lowest increase with only $10 in additional income required to purchase the average home. This doesn’t have much of an impact on affordability. The Montréal borrower in this scenario would pay just $1 dollar more on their monthly mortgage payment in May compared to if they bought in April.
Conditions also tightened slightly in some of Canada’s priciest housing markets; both Toronto and Vancouver saw required incomes increase, by $780 and $900, respectively. This is a turnaround from previous months, when subdued demand and an influx of inventory had kept a lid on price growth in these cities; however, this spring, it appears a mix of timing and the narrative of rising mortgage rates is incentivizing buyers who’ve put off their buying decisions.
Will real estate become more affordable in Canada in 2026?
Given the ongoing volatility in markets due to the war in Iran, it’s hard to predict where mortgage rates will trend next, and whether they’ll help improve real estate affordability in Canada this year. The prolonged closure of the Strait of Hormuz has put immense upward pressure on oil prices and inflation globally, which is a factor the Bank of Canada has had to balance in its rate decision-making – though it continues to hold its trend-setting rate for the time being.
Meanwhile, bond yields, which underpin fixed mortgage rate pricing, have been elevated since the start of March, as investors react to the same geopolitical unease and inflation pressures. However, CREA says there’s cause for optimism, as the spring sales data shows encouraging signs of returning demand, leading to a rebalancing of inventory levels, and stabilizing home prices.
Should this continue – and assuming there are not additional economic surprises – the national association expects a gradual improvement in real estate demand throughout the remainder of the year, with slow recovery in price growth.
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Penelope Graham, Head 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.