Although the housing market has slowed down considerably across Canada, the problem of affordability still exists.
After improving slightly in the final three months of last year, home affordability worsened once again at the start of this year, according to Royal Bank of Canada, with housing costs hitting a “multi-decade high.”
That could make things worse next week, when the Bank of Canada is widely expected to raise interest rates for the fourth time in a year.
RBC’s latest housing affordability report shows it now takes nearly 48.4 per cent of pre-tax income to afford an average home in Canada. The increase in housing costs in the first quarter more than wiped out the improvement seen in the three months before.
In Vancouver, home ownership costs have skyrocketed, today it takes 87.8 per cent of an average income to afford an average home.
In Toronto it is 74.2 per cent but the Toronto area was just one of two cities, along with Winnipeg, to see an improvement in affordability in the first quarter of this year.
The RBC report comes as the Bank of Canada prepares for an interest rate decision next week. According to rate analysts at CIBC, the markets are pricing in a 90-per-cent chance that the central bank will raise interest rates next week, the fourth-rate hike since July of last year.
A Bank of Canada rate hike would mean immediate mortgage rate increases on variable-rate mortgages, as well as on several other types of loans, including home equity lines of credit. -CINEWS