Home Affordability Worsens in Majority of Provinces Amid July Rate Hike

According to fresh national data, home affordability took another hit in July, with the majority of provinces seeing increased pressure on buyers. The Bank of Canada’s latest rate hike is a major factor, driving up mortgage costs and widening the gap between household income and what’s needed to buy a home.

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Market Shows Signs of Stabilizing, But Affordability Lags

According to CREA’s July 14 report, the Canadian housing market is starting to stabilize. Sales and new listings are returning to more normal levels, offering some breathing room for buyers. But don’t let that fool you — the cost of homeownership is still outpacing most Canadians’ wallets.

The reason? The Bank of Canada’s 10th interest rate hike. While home prices have dropped annually, interest costs have climbed fast enough to cancel out those price savings. The result is a harsher affordability picture — even in provinces where homes got cheaper.

Here’s a quick July snapshot:

• Sales were up 1.5% month-over-month.
• Transactions rose 4.7% compared to June 2022.
• The national average home price hit $760,600, a $5,700 increase from June — but still $35,700 lower than last year.
• CREA’s Composite MLS HPI showed 2% monthly growth but remained down 4.5% year-over-year.
  
  To see how price drops could lead to broader financial instability — especially for lenders and insured mortgage holders — check out our deep dive on declining home prices and their impact on Canada’s financial system.

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6 Provinces See Rising Income Requirements Despite Falling Prices

This month’s most surprising insight? Even though 7 out of 10 provinces saw home prices fall, 6 of them still posted higher income requirements to qualify for a mortgage.

Take Prince Edward Island. The average home there dropped by $6,200. But due to higher rates, the income needed to qualify for a mortgage still jumped by $1,303, rising from $79,316 to $80,619.

Here’s what’s happening: as mortgage rates go up, so does the amount of income you need — even if the home itself is cheaper.

This same trend hit Alberta, Ontario, and Quebec too. Rates continue to outweigh price declines, keeping homeownership out of reach for many.

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The Bright Spots: Where Affordability Actually Improved

Not all the news is gloomy. Four provinces — British Columbia, Quebec, Manitoba, and New Brunswick — saw improvements, even if they were small.

Here’s how things shifted:

• British Columbia: A $46,600 drop in home prices helped reduce the income needed by $18,724, bringing it to $201,362.
• Quebec: Prices fell by $18,400, and income needed dropped slightly to $100,404 — down from $100,546.
• Manitoba: A modest $12,800 price dip helped lower required income from $93,598 to $93,022.
• New Brunswick: Saw both a price drop ($11,100) and a $411 decrease in income needed.

These improvements, while welcome, still leave the majority of Canadians battling tighter budgets, especially with rates rising faster than paychecks.

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What the BoC’s 10th Rate Hike Did to Mortgage Payments

If you want to understand just how deeply rate hikes are affecting affordability, let’s look at real-world mortgage numbers.

In March 2022, a $300,000 mortgage with a 5-year fixed rate and 25-year amortization had:

• Monthly payments of $1,322
• An even split: $661 toward interest, $661 toward principal
• Required income: $80,100

Fast forward to July 2023:

• Monthly payments jumped to $1,710
• Only $463 goes toward principal — the rest to interest
• Required income: $94,800

So even for an affordable mortgage amount, you’d now need nearly $15,000 more income per year to qualify — just because of interest.

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Where You Can Still Buy on a Sub-$100K Salary

Despite growing affordability challenges, these six provinces still offer opportunities for homebuyers with income under $100,000:

Province	Income Needed (July 2023)
Newfoundland & Labrador	$60,309
New Brunswick	$71,816
Saskatchewan	$72,328
Prince Edward Island	$80,619
Nova Scotia	$84,156
Manitoba	$93,022

And here are the provinces where buyers now need a six-figure income just to qualify:

Province	Income Needed (July 2023)
British Columbia	$201,362
Ontario	$190,569
Alberta	$100,987
Quebec	$100,404

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Final Thoughts and Forecast for August

With 10 interest rate hikes behind us and inflation still hovering above target, Canadian homebuyers are clearly feeling the pressure. And while prices in many markets are dipping, rising borrowing costs continue to erode affordability.

Looking ahead to August, don’t expect any sudden relief. Unless fixed mortgage rates drop or the Bank of Canada holds off on more hikes, the outlook will likely remain the same: home prices stable, affordability strained.

That said, knowledge is power. Tools like mortgage calculators, rate comparisons, and broker advice can make a big difference in what you qualify for — and how much you’ll actually pay.

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Let Mortgage.Expert Help You Navigate Today’s Market

At Mortgage.Expert, we work with Canadians across the country to navigate rising rates, changing markets, and stressful approval processes. Whether you’re just starting to plan or you’re ready to lock in a deal, our advisors bring clarity and confidence to your mortgage journey.

Let’s Talk Mortgages — No Obligation, Just Answers. Let’s figure out how to make homeownership work — even in a high-rate world.