Lower home prices in April improved affordability in half of Canada’s housing markets

Borrowing costs were largely stagnant in April, but slumping home sales – and their pull-down effect on real estate prices – helped improve affordability conditions in about half of Canada’s largest markets.

The April edition of Ratehub.ca’s Affordability study finds that it became easier to purchase a home in seven of 13 markets over the course of the month, with the greatest improvements seen in the Greater Golden Horseshoe markets, including Toronto and Hamilton.

The study uses national real estate data, average mortgage rates, and changes to the mortgage stress test rate to calculate how home affordability evolves in real time, on a month-over-month basis. In April, the average five-year fixed mortgage rate remained unchanged from March, at 4.38%, along with the corresponding stress test – which tacks an additional 2% onto the contract rate borrowers receive from their lender – and 6.38%. Affordability is illustrated through the amount of income a borrower would need to earn to qualify for a mortgage on the average-priced home in each city, as well as the monthly mortgage payment.

Little change in April interest rates

Several factors led to little movement in interest rates over the course of the month; the Bank of Canada opted to leave its benchmark overnight lending rate unchanged at 2.75% in its April 16 rate announcement, meaning the prime rate at most lenders – and by extension, variable mortgage rates – stayed the same. Fixed mortgage rates were largely unchanged after being discounted in late March and early April due to dropping bond yields, which had fallen in response to tariff-induced market uncertainty.

However, as home sales are largely on the decline in Canada – transactions were down 9.8% year over year in April according to the Canadian Real Estate Association – that’s led to a decrease in home prices in many of Canada’s urban areas, leading to improved affordability even as borrowing costs stayed flat.

April 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 March and April 2025. Average home prices are from the CREA MLS® Home Price Index (HPI). Please note that Toronto’s March calculations have been updated in this report to reflect CREA’s most recently reported home prices.

For the third month in a row, Toronto and Hamilton top the chart in terms of improved affordability, as deep declines in home sales have led to a softening in prices.

Hamilton saw the most significant decrease with $1,800 less income required to purchase the average home, which fell in price by $9,600 to $801,400. This drop in home prices was the largest recorded of all the cities. As a result, the average monthly mortgage payment also declined by $49, to $4,066.

It was a similar scenario in Toronto, as the average home price dropped by $7,500 compared to March, to $1,184,600. That translates to $1,400 less in required income for a borrower applying for a mortgage, and a monthly payment of $5,122, a decrease of $38.

On the other side of the spectrum is Regina, which saw the most significant increase in average home price; it increased by $9,100 month over month to $335,400. As a result, a buyer there would need to earn $1,730 more in April than they would in March to qualify for a mortgage; the monthly payment increased by $46 to $1,702.

What’s next for home affordability in Canada?

As has been the case since the start of 2025, the evolving tariff narrative and accompanying market unease have made for a shaky interest rate outlook. The impacts of the ongoing trade war are starting to show up in Canada’s domestic data, such as the April labour survey report, which showed the country’s unemployment rate increased to 6.9%, with the manufacturing industry – which is highly exposed to tariffs – hardest hit.

However, a stronger-than-expected April inflation report has complicated the scenario for the Bank of Canada, which finds itself weighing the need to reign inflation growth in, with adding stimulus to support Canada’s economy to counter tariff impacts. Currently, it looks most likely that the central bank will opt to hold its trend-setting rate in its next scheduled announcement on June 4th, though economists largely expect two more rate cuts before the end of 2025.

In an economic note following the April inflation release, BMO Chief Economist and Managing Director of Economics Douglas Porter writes that increases in food and vehicle prices are proving to be stubborn, driving up the core measures of inflation that the BoC monitors when making its rate decisions. Meanwhile, the deep decline effect seen in gas prices – as well as the removal of the Consumer Carbon Tax – will fade over time.

“This leaves the Bank of Canada in a spot, as their two main measures of core are now running at their fastest pace in a year—i.e., back before they began cutting rates,” writes Porter. “After a weak jobs report handed the Bank a good reason to cut, this back-up in core above 3% pretty much washes that away. Given a weak growth outlook for much of 2025, we continue to expect further rate reductions, but the Bank may need more time to gain comfort in the inflation outlook.”

Also read:

• Lower mortgage rates made it easier to buy a home in March
• April Canadian home sales flat on a monthly basis: CREA
• GTA April home sales down 23% as buyers stick to the sidelines
• Bank of Canada holds target interest rate at 2.75% in April 2025 announcement