WIth two interest rate cuts under our belt, and more promised by the Bank of Canada, how is this affecting the spending power of those wanting to buy their first home, or upgrade to a bigger property?
So far, Canada has seen rates cut for two successive months, moving the cost of cash from 5% to 4.5%.
What does that mean on the street?
Our prime rate has fallen to 6.7%, and tumbling bond rates have helped the five-year, fixed-rate deal to an average 5.29%.
That’s great news, but economists say we’ll only see a big difference when the rate has moved a full percentage point to 4%.
Agents across Canada are reporting more buyer inquiries than they’ve seen for months. That doesn’t signal the challenge is over, but it’s a start.
To see the true difference that interest rates have made so far on the spending power of buyers, Ratehub has analysed some of Canada’s key markets.
As part of its calculation, it used average prices cited by the Canadian Real Estate Association, and mortgage rates of 5.47% for June and 5.29% for July.
Here’s what it found:
Toronto: With an average home price of $1.097 million, a buyer needed an income of $208,950 in July, a fall of $5,410 compared with June’s numbers.
Vancouver: Prices are slightly higher at $1.197 million, requiring an income of $226,680. Compared with June, this is a fall of $5,020 in the income required.
Montreal: With a much lower asking price of $533,100, the fall in the required income of $109,170 was $2,290.
Calgary: A boom market right now, Calgary required an income of $118,980 to buy a property with the average price of $588,600 in July. That represented a drop in required income of $1,690 compared with June.
Ottawa: A slightly more expensive city than Calgary, the average price in Ottawa was $648,000 in July. You needed an average income of $131,210 to obtain a mortgage, which was a $1,560 drop on June’s number.