Why are mortgages so expensive in Canada?

Ratehub.ca just released its latest January Affordability Report. (Both MoneySense and Ratehub.ca are owned by Ratehub Inc.) It covers the first monthly snapshot of 2025 and found that affordability conditions worsened in 12 of 13 markets. The culprit was largely stagnant mortgage rates. The average five-year fixed mortgage rate and corresponding stress test rate stayed the same month over month, at 4.7% and 6.7%, respectively. Unlike in much of the latter half of 2024, when lower interest borrowing costs helped offset rising home costs, home buyers had little rate relief in January, with the latest Bank of Canada (BoC) rate cut occurring at the end of the month.

As a result, the required incomes to qualify for a mortgage on the average-priced homes rose in all but one of the markets tracked. The data, which measures how affordability conditions are shifting on a month-over-month basis, uses changing mortgage and stress test rates, as well as real estate data from the Canadian Real Estate Association (CREA). 

Let’s take a look at how this affected the required income in housing markets across Canada.

Housing affordability across Canada’s major cities

The chart below shows how affordability evolved between December 2024 and January 2025, in Canada’s main housing markets, based on the income required to qualify for a mortgage.

January 2025: How much do you need to earn to buy a home in Canada?

To see more data on these two charts, scroll the chart left to right with your fingers or press shift, as you use scroll wheel on your mouse to read.

Canadian cities where affordability improved

Where in Canada is owning a home becoming more affordable?

Fredericton: An outlier among tightening prices

Fredericton saw booming real estate demand for much of 2024, and this past January, too. According to the New Brunswick Real Estate Board, sales rose 18% year over year in the first month of 2025. However, that was slightly outpaced by a 21% increase in new listings, which helped cool off the benchmark price slightly, coming in at $338,800 in January—$2,300 less than in December 2024. With all other borrowing costs staying the same, that helped lower the required household annual income to get a mortgage by $450.

New Brunswick’s capital city was the only city tracked by the study to see home affordability improve, but the margin is razor thin. The average monthly mortgage payment for an average-priced home in the city decreased by a modest $12, to $1,775.

Canadian cities where affordability worsened

So, 12 of 13 Canadian cities saw affordability worsen during the month of January; even some of Canada’s lowest-priced markets found themselves at the top of the list.

Hamilton

Hamilton holds the dubious title of the city where affordability declined the most in January 2025; the benchmark home price rose a whopping $20,900 on a monthly basis, to $819,500. As a result, the amount a home buyer would need to earn to get a mortgage rose by $4,050, while the monthly mortgage payment increased by $110 to $1,320.

Overall market conditions were fairly soft in Hamilton in January. Home sales slowed while inventory picked up, and a larger ratio of higher-priced homes in the sales mix pushed home prices higher, says the Realtors’ Association of Hamilton-Burlington.

“Though the uptick in new inventory has prevented any significant movement in benchmark prices, the market has shown some variation. As of January, the regional benchmark price was $819,500—nearly 1% higher than last year,” reads the real estate board’s release. “However, this overall increase has been primarily driven by growth in detached homes, semi-detached units, and row properties. Apartment-style units have experienced declines in pricing, reflecting the ongoing market shifts.”

Halifax: Tight inventory drives prices higher

According to the Nova Scotia Association of Realtors, home sales still lag behind that of their five- and 10-year averages, but so too are the number of homes for sale, which have helped keep buying conditions fairly tight on the east coast. In Halifax-Dartmouth specifically, the number of properties changing hands ticked up just 0.4% year over year, yet the average home price still rose 5.5% on an annual basis. 

According to Ratehub.ca’s study, the benchmark home price in Halifax increased by $17,000 compared to December, to $550,500. That resulted in the average required income for local mortgage applicants to increase by $3,310, and monthly mortgage payment to rise by $89, to $2,884.

Edmonton: Tight inventory drives prices higher

Edmonton started the year with brisk home sales, with the Realtors’ Association of Edmonton reporting a 12.1% monthly uptick, and 11.2% from January 2024. While new listings are also up strongly, sales activity was enough to push home prices in the city higher, with a benchmark of $412,200 – up $14,800 from December levels.

In turn, that’s caused the required income to qualify for a mortgage to rise by $2,890, and the resulting monthly mortgage payment to increase by $78, to $2,160.

How much mortgage can you afford? How much house can you buy?

The Ratehub.ca study analyzes how affordability conditions evolve on a monthly basis in 13 of Canada’s major housing markets. It takes into account mortgage rates, the mortgage stress test, as well as local home prices, to calculate the required income needed to purchase the average-priced home in each city, as well as what the monthly mortgage payment would be. If you’re shopping for a home and are curious as to how much you could afford, you can crunch your own numbers using the MoneySense mortgage affordability calculator. You can also check this table to compare mortgage rates in Canada right now.

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What’s next for Canadian mortgage rates in 2025?

The outlook for Canadian mortgage rates remains somewhat murky, following weeks of tariff-induced tumult. The threat of the United States’ proposed tariffs has led to volatility in the bond market and shifted the trajectory for future BoC rate changes.

Fixed mortgage rates dropped in the first week of February 2025, as bond and stock markets plunged in response to the signature of U.S. president Donald Trump’s first tariff executive order. This led to discounts in the fixed mortgage rate space, as lenders use bond yields as the pricing floor for their fixed-rate borrowing products. 

While yields have largely stabilized after Trump announced a 30-day tariff reprieve for Canada, fixed rates have yet to creep back up. In fact, today’s rate shoppers have access to five-year terms below the 4% range. But given how unpredictable Trump’s economic policies and the market reactions can be, it’s unclear how long the current pricing will stick around. It’s a good idea for anyone looking to lock in to explore their options now and take advantage of a rate hold.

Meanwhile, there’s been whiplash for anyone trying to follow the variable mortgage rate space.  At the height of the early February tariff headlines, several economists forecasted that the tariffs would force the BoC to aggressively cut its target overnight lending rate—which prime and variable rates are based on—much lower than previously expected, potentially down to 1.5%.

However, as it now seems more likely that tariff threats will be used for leverage, these rate cut calls have been walked back. It’s now largely expected that the central bank will hold its rate unchanged in its upcoming March 12 rate announcement, and is on track to make just two more quarter-point cuts this year, which would bring its rate down to 2.5%. That will usher in some additional rate relief for borrowers. But don’t be surprised if the outlook changes again over the coming months.

Read more about mortgages:

• Where to buy real estate in Canada
• The complete guide for first-time home buyers in Canada
• Tools to calculate your mortgage payments and costs in Canada
• Mortgage refinance calculator
• Mortgage renewal calculator

About Penelope Graham

As director of content at Ratehub.ca, Penelope has over a decade of experience covering real estate, mortgage and personal finance. Her commentary is featured on BNN Bloomberg, CBC and The Globe and Mail.

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