Income needed to buy a home in Canada up 6% even as prices fall

The household income needed to qualify for a mortgage on a typical Canadian home rose about six per cent in the past year, even as the benchmark price of that home fell, according to an analysis by mortgage lender nesto that uses Canadian Real Estate Association (CREA) price data.

The analysis, published Oct. 28 and reviewed Nov. 2, puts the national benchmark price at $651,400 in September, down $26,000 from a year earlier. At nesto’s current insurable five-year fixed rates, a household needs about $127,085 a year to buy at that price with 20 per cent down. That is $7,181 more than the same purchase required at rates a year ago. Over a five-year term, the mortgage would cost $114,205 in interest, up $16,204.

nesto’s model assumes a 25-year amortization, a 39 per cent gross debt service ratio and the federal stress test, which qualifies borrowers at the greater of 5.25 per cent or their contract rate plus two percentage points. The figures reflect one lender’s rates and are qualification thresholds, not recommendations on what a household should borrow.

Using nesto’s provincial table, Canada News Media calculated the percentage changes below. Prices moved in different directions, but the income needed to qualify rose between 5.4 and 6.0 per cent in every province.

Source: nesto, using CREA composite benchmark prices for September 2026 and nesto insurable five-year fixed rates. Percentage changes are Canada News Media calculations from nesto’s dollar figures.

In British Columbia, the benchmark price fell $44,200 to $868,900, a drop of about 4.8 per cent. A buyer there still needs $9,578 more in income than a year ago, for a total of $168,491. In Ontario, prices fell $30,800 to $736,300 (about 4.0 per cent), while the required income rose $8,117 to $143,247. Even in Quebec, where the benchmark rose 1.1 per cent to $537,100, the income hurdle climbed 5.9 per cent.

Newfoundland and Labrador was the only province where price growth (5.5 per cent) kept pace with the rise in required income (5.4 per cent).

The gap traces back to the bond market. Fixed mortgage rates follow Government of Canada bond yields more closely than the Bank of Canada’s policy rate. REMAX Canada reported that the five-year yield rose from 2.73 per cent on Oct. 29, 2025, to 3.42 per cent on Sept. 2, 2026, while the central bank held its rate at 2.25 per cent. nesto, citing Bank of Canada tables, put the yield at 3.64 per cent on Oct. 19, a rise of 0.91 percentage points from the October 2025 level.

The Bank of Canada then raised its policy rate a quarter point to 2.50 per cent on Oct. 28, its first increase since July 2023, according to nesto. RBC, TD, BMO and CIBC raised their prime rates from 4.45 per cent to 4.70 per cent effective Oct. 29. Existing fixed-rate mortgages are unaffected, nesto noted, but the increase can affect the rates offered on new purchases and renewals. Canada News Media has earlier coverage of the rate hike and the cooling market.

The price side of the comparison is softer. CREA reported on Oct. 16 that its national composite MLS Home Price Index edged down 0.4 per cent from August to September and was down 3.4 per cent from a year earlier, while national home sales fell 2.3 per cent from August. CREA’s index and nesto’s dollar benchmark are different measures, so the percentage changes in this article are Canada News Media arithmetic on nesto’s table rather than CREA’s headline index.

More data is due soon. Statistics Canada releases October inflation figures on Nov. 16, CREA publishes its October housing statistics on Nov. 17, and the Bank of Canada’s next rate decision is Dec. 9.

Sources: nesto, Bank of Canada Raises Policy Rate to 2.50%; REMAX Canada, Why Your Fixed Mortgage Rate Can Still Go Up; CREA national statistics; BNN Bloomberg, CREA downgrades home sales forecast.