Canadian Real Estate Unaffordable Until 2035, & Mortgages Won’t Fall Much Further

Recent analyses indicate that Canadian real estate will likely remain unaffordable until at least 2035. Despite recent interest rate cuts aimed at easing mortgage pressures, these measures have provided only temporary relief. Experts predict that borrowing costs will begin to rise again by 2026, further exacerbating housing affordability challenges.

The rapid reduction in interest rates was intended to prevent a looming mortgage crisis. However, this strategy has led to increased borrowing power among potential buyers, inadvertently driving home prices higher. Consequently, any short-term improvements in affordability are expected to be fleeting, with long-term consequences for the housing market.

Major urban centers like Toronto and Vancouver continue to be particularly unaffordable for average buyers. The combination of high demand and limited supply in these cities has sustained elevated home prices, making it challenging for many Canadians to enter the housing market.

Additionally, the Bank of Canada has indicated that changes to mortgage structures, such as extending amortization periods, are unlikely to resolve housing affordability issues. The central bank emphasizes that a balance between housing supply and demand is essential for meaningful improvements, a process that will require time.

The situation is further complicated by the fact that a significant portion of Canadian mortgages are set to renew at higher interest rates in the coming years. This "payment shock" poses risks not only to individual homeowners but also to the broader financial system, as higher payments may lead to increased defaults and financial instability.

In summary, while recent policy measures have provided temporary relief, the underlying issues of housing affordability in Canada persist. Without substantial changes to address the balance of supply and demand, experts warn that the dream of homeownership will remain out of reach for many Canadians until at least 2035.