Canada's Housing Affordability Gains Slow Amid Rising Interest Rates

Rising household income was the sole driver of modest affordability improvements across Canada in Q2, according to RBC's national housing affordability measure. The overall index was little changed at 52.8%, marking its smallest improvement of 0.4 percentage points in nearly a year.

Ownership costs remained stable as a share of household income in most markets, with notable declines still observed in Vancouver and Toronto. However, several Prairie and Atlantic markets saw their first increases in several quarters.

A stabilization of home prices and unchanged interest rates contributed to the slight affordability gain nationwide. Nonetheless, upward pressure on long-term interest rates and potential Bank of Canada hikes next year could push ownership costs higher again.