Canadian housing affordability sees record 11-quarter improvement streak

Canadian housing affordability has improved for a record 11 consecutive quarters, marking the longest streak of gains ever recorded. The mortgage payment on a typical home now consumes 50.9% of median household income, down 0.7 percentage points from the previous quarter and well below the peak of roughly 66% in 2023, according to National Bank's Q3 housing affordability index. The cumulative improvement since the fourth quarter of 2023 now approaches 15 percentage points. "Housing affordability improved for an eleventh consecutive quarter in Q3 2026, extending the longest period of gains on record," said National Bank economist Kyle Dahms. The improvement was driven by a 1.0% drop in seasonally adjusted home prices, which trimmed 0.5 points from the index, and a 0.7% rise in household income, which trimmed another 0.4 points. These gains more than offset a 0.2-point erosion from rising mortgage rates in the quarter.

Despite the sustained improvement, affordability remains severely strained by historical standards. "The Composite 10 remains 9.7 points above its historical average and 8.5 points higher than its pre-pandemic level," Dahms explained. The bank notes the historical average itself has climbed from 31.1% of income a decade ago to 41.2% today, reflecting a long-term deterioration in baseline affordability. Rising mortgage rates now threaten to reverse recent gains. The bank's benchmark five-year fixed mortgage rate added 38 basis points in October, up 45 basis points from its Q3 average. It was the largest monthly jump in four years, pushing the rate to its highest level since July 2024. "All in all, housing affordability is facing in Q4 its most significant interest-rate challenge since 2022," Dahms warned.

The bank estimates that if home prices are flat in October, higher mortgage rates alone would add 2.4 points to the payment burden. That would be partially offset by a 0.2-point improvement from rising incomes, but still leave the index at 53.1%. The Bank of Canada warns inflation won't return to its target rate until 2028, suggesting higher borrowing costs will persist. Your Space Hamilton reported in November that analysis shows Canada's housing affordability gap could take decades to close at current trends.

With files from Better Dwelling