Although mortgage rates in Canada are starting to trend lower, there's sadly little relief on the horizon for prospective homebuyers, as affordability conditions continued to worsen in most cities — including Toronto — throughout the month of April. 

The latest affordability analysis by Ratehub.ca paints a somber picture of the country's current real estate market, finding that it became tougher to qualify for a mortgage in 10 out of 13 major markets in Canada last month due to rising home prices. 

The report analyzed the minimum annual income required to buy an average home in major Canadian cities based on April 2024 and March 2024 real estate data, while also taking into account how mortgage rates and the mortgage stress test are impacting the income needed to buy a home. 

According to the study, the average five-year fixed mortgage rate decreased slightly between March and April from 5.62 per cent to 5.5 per cent. 

The average mortgage stress test — which requires borrowers to prove that they could afford to carry their mortgage at a rate of two per cent or higher than the one they receive from their lender — also sits at 7.5 per cent. 

"The two key variables that impact home affordability, home values and interest rates, moved in opposite directions," said James Laird, Co-CEO of Ratehub.ca. 

"Interest rates are down and home values are up in 12 out of 13 cities we looked at. The increase in home values was enough such that affordability worsened in 10 of 13 cities despite the rate drop." 

The data collected was based on a mortgage with a 20 per cent down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Average home prices were sourced from the CREA MLS Home Price Index (HPI).

In Toronto specifically, the average home price in March 2024 was $1,113,600 and $1,128,100 in April 2024, representing a change of $14,500 —the second-highest increase seen in Canada besides Halifax. 

How much you need to earn to be able to afford a home in major Canadian cities. Source: Ratehub.ca. 

The study also found that the income required to buy an average home in Toronto in March was $217,500, a figure that increased to a staggering $218,050 in April. 

Despite the increase, the latest data release from the Canadian Real Estate Association (CREA) reveals that an increase in listings has resulted in the most "balanced market conditions we've seen at the national level since before the pandemic" this spring. 

"Mortgage rates are still high, and it remains difficult for a lot of people to break into the market," said James Mabey, Chair of CREA's 2024-2025 Board of Directors. 

"For those who can, it's the first spring market in some time where they can shop around, take their time and exercise some bargaining power. Given how much demand is out there, it's hard to say how long it will last," Mabey continued. 

According to Ratehub.ca, it's expected that homebuyers will return to the real estate market once the Bank of Canada starts cutting its lending rate, which could happen as early as the next announcement on June 5, 2024.