Since 2013, home prices have been on a consistent upward climb, with the rate of increase notably accelerated during the pandemic. At the same time, interest rates remained moderately steady until 2021 when they plunged to the lowest in Canadian history, only to subsequently spike to a 15-year high. Both of these factors have contributed to an increase in monthly mortgage payments, and with income growth struggling to keep pace, some homebuyers are taking a step back from the real estate market.
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So exactly how quickly has the cost of mortgages grown compared to income? To find out, Zoocasa analyzed home prices from September 2013 to September 2023 in 17 cities and calculated what the average mortgage payment would be for each year on an average-priced home, assuming the minimum possible down payment, an amortization period of 25 years and using the 5-year fixed rate in September of each year analyzed. We then compared this to the average annual income according to Statistics Canada in each city to see how the rates of growth differ.
The 5-year fixed mortgage rates were sourced from Ratehub.com and were as follows: In September 2013, the 5-year fixed rate was 3.29%, and in September 2014, the rate dropped to 2.72%. The rate dropped even further in September 2015 and September 2016 to 2.34% and 2.17% respectively. The rate climbed slightly to 2.64% in September 2017 and by September 2018 the 5-year fixed mortgage rate was up to 3.09% before declining to 2.37% in September 2019. The rate remained low at 1.64% in September 2020 and September 2021, but in September 2022 the rate surged to 4.34%. In September 2023, the 5-year fixed rate was at a peak of 5.49%.
Mortgage Payments Up By More than 100% in 10 Cities While Income Up by Just 16% or Less
Over the last ten years, average monthly mortgage payments increased in every city analyzed, with the majority of cities’ mortgage payments increasing by more than $1,000 and four cities increasing by more than $3,000 since 2013.
Despite Ontarian and British Columbian cities benefitting from considerable increases in average income, monthly mortgage payments in both provinces were up substantially, with Hamilton-Burlington and Barrie District experiencing the largest increases.
In 2013, the average monthly mortgage payment in Hamilton-Burlington was just $1,680 and in 2023 it rose to $5,034 – an increase of $3,354. Barrie District followed a similar trajectory with the average monthly mortgage payment rising from $1,442 in 2013 to $4,778 in 2023. The average price for a home in Hamilton-Burlington and Barrie District increased by more than $500,000 between 2013 and 2023 which likely drove this increase in monthly mortgage payments. In the same time period, wages increased in both cities by an average of $6,300, or 12.8%, which is hardly enough to keep up with the near or over 200% rate of increase for mortgage payments in each city.
Following that, Victoria and Greater Toronto were the next cities to see mortgage payments increase by more than $3,000 – an increase of 158% for Victoria and 129.8% for Toronto. While income in both cities was up by more than $7,000, this equates to just a 15.2% increase for Victoria and a 16% increase for Toronto.
Affordable Home Prices Keeping Mortgage Payments Down in Some Cities
The only three cities that experienced less than a 50% increase in mortgage payments were Saskatoon (45.2%), Edmonton (39.4%), and Regina (29.4%). Similarly, they were also the only cities where home prices increased by less than $60,000, with Regina home prices only increasing by $10,600 from 2013. This allowed Regina’s monthly mortgage payments to inch up by just $422 in the last ten years. However, wages in Regina actually fell, with the average income in 2013 at $52,800 and in 2021, the last time data was available, declined to $52,100.
Wages in Edmonton and Saskatoon also fell, though just by $100 in Edmonton and $700 in Saskatoon.
Calgary was the only other city to experience a decrease in average income, dropping from $65,800 in 2013 to $61,400 in 2021. Compared to other metropolitan cities, home prices and monthly mortgage payments grew moderately less. Monthly mortgage payments in Calgary increased by $1,350 to $3,317 in September 2013 – the highest average monthly mortgage payment outside of Ontario and British Columbia.
Even Saint John, largely touted as one of the most affordable cities in Canada, had home prices increase by $124,000 and monthly mortgage payments increase by nearly $1,000. Saint John also has the lowest average income of the cities we analyzed at $47,400 in 2021, just behind Halifax-Dartmouth at $48,100.
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