Canadian housing affordability eroded in the first quarter of 2011, following improvements in the last half of 2010, according to the latest Housing Trends and Affordability Report report released by RBC Economics Research.
Home price gains in the majority of Canada’s key markets were the main driver of the decline in housing affordability, while flat mortgage rates played a neutral role this time. In the previous two quarters, declines in mortgage rates were the principal source of improvement in affordability.
“We expect that the Bank of Canada will soon resume its campaign to normalize its’ interest rate policy, which will adversely impact housing affordability in Canada,” said Robert Hogue, senior economist, RBC. “Continued growth in household incomes, however, will likely soften the blow.”
The RBC housing affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a specified category of home. During the first quarter of 2011, measures at the national level inched higher thus representing a decrease in affordability.
What does this mean for you?
If you are looking to buy a home in the near future you should consider getting pre- approved for a mortgage. A pre-approval will guarantee your rates on fixed term mortgages for up to 120 days. Not only will you know how much you can really afford, but you’ll have our guarantee that if the rates increase in the next 120 days your rate will not.