Lower home prices and mortgage rates improved buying conditions in July

Those on the hunt for a new home experienced a dash of good fortune in July; a combination of lower home prices and easing mortgage rates provided some of the friendliest buyer conditions of the summer.

According to the July edition of Ratehub.ca’s Affordability Report, this was the case in 12 of 13 markets. The study, which analyzes national real estate data, changing mortgage rates, and the mortgage stress test, provides a month-over-month snapshot of how easy it is to buy a home in cities across Canada.

Affordability is defined by the amount of income a buyer would need to earn to qualify for a mortgage on the average priced home in their market. It also looks at the average monthly mortgage payment in each city, and whether they rise and fall each month.

Canadian home prices have yet to pick up

Home prices were overall stable across Canada in July, despite a continued uptick in sales; the Canadian Real Estate Association (CREA) reports the national average price was roughly flat year over year at $672,784 – a difference of just 0.6%.

Meanwhile, lower bond yields last month paved the way for fixed mortgage rate discounts; the average five-year fixed rate used in the study fell to 4.4%, from 4.8% in June. Meanwhile, the average mortgage stress test dropped to 6.4% from the previous 6.48%.

July 2025: 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 June and July 2025. Average home prices are from the CREA MLS® Home Price Index (HPI).

After a stagnant spring, many local housing markets saw an improvement in sales activity, while the number of available homes for sale is slowly decreasing. It’s a tentative recovery from a season of frozen buyer indecision; few were keen to jump into the market amid the volatile tariff threats and market disruptions that plagued the first start of the year. CREA is optimistic that buyers will now start to return as these factors have – somewhat – stabilized.

“With sales posting a fourth consecutive increase in July, and almost 4% at that, the long-anticipated post-inflation crisis pickup in housing seems to have finally arrived,” said Shaun Cathcart, CREA’s Senior Economist. “Looking ahead a little bit, it will be interesting to see how buyers react to the burst of new supply that typically shows up in the first half of September.”

However, improved buyer activity hasn’t yet made a dent in home price growth – providing today’s buyer with a window to jump in at a lower cost. This was especially evident in the City of Toronto, which topped the list of most improved affordability for the second consecutive month, due to sliding home prices.

Of the 13 cities studied, only one saw home affordability worsen. St. John’s saw $710 in additional income required to purchase the average home. This is due to the home price increase ($6,600), the highest of all the cities. This is the third month where St. John’s has seen an  increase in income required to purchase a home.

Will Canadian real estate get more affordable in 2025?

While borrowing conditions were attractive in July, ideal affordability conditions may be short-lived; fixed mortgage rates have marched higher throughout August, as bond yields jumped higher in response to ongoing inflation and trade uncertainty. This has prompted lenders to increase their fixed mortgage rates, with the lowest available insured five-year term now 4.04%. 

However, the latest slew of economic data could pave the way for rates to dip again. The latest July inflation report from Statistics Canada shows year-over-year growth for the Consumer Price Index fell to 1.7%, from the previous 1.9%. This could give the Bank of Canada room to cut its benchmark rate in its next rate announcement on September 17. Should that occur, variable mortgage rates will lower immediately, as their pricing is directly based off of the BoC’s rate moves.

A central bank rate cut could also lead to lower fixed rates, if bond investors react by lowering yields – which they do when they believe inflation and economic risks are low. Rate shoppers will have more insight to where borrowing costs are headed after the BoC’s next move. 

In the meantime, anyone looking to take out a new mortgage, or renew their existing one, are smart to secure a rate hold from a lender; doing so will guarantee access to today’s rate environment, even if they unexpectedly rise, up to 120 days. And, should rates drop during that time frame, they can still access the lowest available.   

Also read:

• Toronto home sales reach four-year July high
• Canada housing affordability and market trends
• It became tougher to afford a home in nearly all Canadian markets in June
• Inflation and the Consumer Price Index in Canada