Lower home prices improved affordability in 12 of 13 Canadian cities in January
Aditi Gupta, Content Specialist
It became easier to buy a home in 12 of 13 major Canadian cities in January 2026, according to Ratehub.ca’s latest Home Affordability Report.
The improvement was driven mainly by home prices, which moved lower in several markets to start the year. Nationally, the Canadian Real Estate Association (CREA) reported that the National Composite MLS® Home Price Index (HPI) fell 0.9% month over month in January. The non-seasonally adjusted national average home price came in at $652,941 — down 2.6% compared to January 2025.
Ratehub.ca’s monthly study measures how changes in home prices, mortgage rates, and the mortgage stress test affect the income required to buy an average-priced home in each city, along with the corresponding monthly mortgage payment.
In January, the average five-year fixed mortgage rate used in our calculations declined slightly to 4.40% from 4.46% in December, lowering the stress test rate to 6.40% from 6.46%. However, it was price movement, not rate changes, that had the biggest impact on buyers’ purchasing power. “Home affordability improved in all except one of the cities we studied,” says Penelope Graham, mortgage expert at Ratehub.ca. “Mortgage rates decreased slightly month-over-month, but not enough to have a big impact on the income required to buy a home.”
January 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 January 2026 and December 2025. Average home prices are from the CREA MLS® Home Price Index (HPI).
The city topping the list in terms of improved affordability is Vancouver. Home sales slowed sharply to start the year; according to the Greater Vancouver REALTORS® (GVR), residential sales totalled 1,107 units in January, down 28.7% year over year. At the same time, inventory climbed to 12,628 properties, marking a 9.9% annual increase. With demand cooling and supply building, price pressure eased. The average home price fell by $12,900 between December and January, to $1,101,900. As a result, the income required to purchase the average home declined by $3,600, while the estimated monthly mortgage payment dropped by $100, or $1,200 annually.
Toronto and Ottawa also recorded meaningful affordability gains. In Toronto, the average home price fell by $7,100, reducing the income required to buy by $2,320 and lowering the monthly mortgage payment by $65. Ottawa saw a similar dynamic, with prices declining by $7,000 month over month. That translated into a $1,940 reduction in required income and a $54 decrease in the monthly payment.
Several mid-tier markets, including Victoria and Hamilton, also saw modest improvements as prices softened. Even in cities where home prices ticked slightly higher — such as Calgary — affordability still improved due to marginally lower borrowing costs.
The one city where affordability worsened
Montreal was the only market studied where home affordability deteriorated in January. Unlike most major cities, price pressure moved higher. The average home price increased by $6,600 month over month, rising to $579,900. That pushed the income required to purchase the average home up by $680. The Montreal borrower in this scenario would pay $16 more on their monthly mortgage payment — or $192 per year — in January compared to if they bought in December.
What’s next for home affordability in Canada?
January’s data reinforces an important trend: right now, home prices are doing more to move affordability than mortgage rates. While borrowing costs dipped slightly month over month, the impact on qualification amounts was limited. Instead, it was price adjustments that drove most of the improvement in purchasing power.
At the same time, rate cuts appear to be on pause. The Bank of Canada has held its target overnight rate at 2.25% in recent announcements, signalling that policymakers believe current levels are appropriate as the economy stabilizes. As a result, dramatic downward moves in variable mortgage rates are unlikely in the near term.
Bond yields remain volatile, responding to global economic data, inflation trends, and central bank signals. Because fixed mortgage rates move closely with bond yields, this volatility could keep fixed-rate pricing fluid in the months ahead.
For buyers entering the market, securing a competitive rate remains critical. Getting pre-approved can lock in today’s rates for up to 120 days, offering protection against potential increases while you shop.
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Aditi Gupta, Content Specialist
Aditi Gupta is a content specialist at Ratehub, with a focus on creating informative content about mortgages.