Prices fell to ease the strain for buyers in August – but fixed rates are climbing
Falling home prices helped shift the affordability balance in favour of buyers across most of Canada in August, but the window may already be closing.
According to Ratehub.ca's Home Affordability Report, buyers in 10 of 13 major markets needed less income to qualify for a mortgage last month, a shift that Jamie David, VP of Mortgages at Ratehub.ca, attributed squarely to price movements rather than any change in borrowing costs.
"Changes this month were solely due to home prices. The average of the Big Five Banks' five-year fixed rates remained the same and had no impact on affordability this month," David said.
The average five-year fixed mortgage rate among Canada's Big Five banks edged just one basis point higher over the month, to 4.55% in August, from 4.54% in July. That's a move too small to materially affect monthly payments or qualification thresholds. It was declining prices, not rates, doing the heavy lifting.
That pattern tracks closely with what analysts at National Bank of Canada documented in their Q2 2026 Housing Affordability Monitor, which found that Canada's record streak of consecutive quarterly affordability improvements had become increasingly dependent on falling home values rather than rate relief, a dynamic the bank's economists cautioned may be approaching its limits.
Toronto led all markets in August, with buyers needing $1,510 less income to qualify for a mortgage on the average-priced home.
"This was due to the home price decrease of $8,700, the biggest change out of all the cities. The Toronto home buyer in this scenario would pay $40 less on their monthly mortgage payment, or $480 per year, in August compared to if they bought in July," David explained.
David noted that Vancouver and Montréal followed closely behind: "Vancouver and Montréal followed Toronto with $1,130 and $1,110 less income required. These were the three cities that saw the biggest improvements."
Halifax bucks the national trend
Not every market moved in the right direction. Halifax posted the steepest affordability decline of any city in the report.
"Halifax saw the biggest increase with $1,360 in additional income required," David said.
"Halifax saw the biggest home price increase at $6,500. The Halifax home buyer in this scenario would pay $36 more on their monthly mortgage payment, or $432 per year, in August compared to if they bought in July."
Ottawa and Fredericton also worsened. "Ottawa and Fredericton continued to see home affordability worsen month-over-month with $830 and $650 in additional income required to purchase the average home," David added.
What rising bond yields mean for buyers
The bigger concern for brokers and their clients is what is unfolding in September. Canadian Mortgage Professional has tracked how bond market pressure has repeatedly pushed fixed mortgage rates higher throughout 2026, and the latest data from Ratehub.ca suggests another leg up may already be underway.
"While there was no change to the average of the Big Five Banks' five-year fixed rates this month, the lowest five-year fixed rate available on the market has now moved higher," David said.
"The best five-year fixed rate is now 4.24%, up 15 basis points from last month. The sub-4% fixed rates that were still available at the time of our previous report have also disappeared."
The five-year Government of Canada bond yield is the key pressure point.
"Fixed mortgage rates are facing renewed upward pressure as bond yields continue to climb," David said.
"The five-year Government of Canada bond yield has risen roughly 23 basis points since September 2, as higher oil prices and renewed inflation concerns have pushed yields higher. Lenders have already responded by raising fixed mortgage rates this week. Fixed mortgage rates could face another round of increases in the days and weeks ahead."
Drew Donaldson, Mortgage Broker and Principal at Donaldson Capital, says higher bond yields are creating pressure on mortgage rates, but he still expects a strong finish to the year for the housing market.https://t.co/q5VXAziOZB
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 17, 2026
For buyers unwilling or unable to absorb higher fixed-rate costs, the options are narrowing. "For borrowers looking for a rate below 4%, variable mortgages are now the only option, with the lowest five-year variable rate currently at 3.40%," David said.
That spread — roughly 84 basis points between the best fixed and best variable — is meaningful, though it comes with the uncertainty that Canada's housing market recovery has historically struggled to absorb when rate volatility rises.
On the value of acting quickly, David was direct: "These recent rate increases show how important it is to secure a rate hold amid the current market volatility. Securing a rate hold can provide valuable protection against further rate increases. For Canadians shopping for a home or approaching a mortgage renewal, a rate hold will lock in today's rates for up to 120 days, protecting them against rate hikes."
That advice lands against a market backdrop that remains subdued nationally. Data from the Toronto Regional Real Estate Board (TRREB) shows August home sales in Toronto fell 2.1% year over year, while new listings dropped 14.1%.
The Canadian Real Estate Association (CREA) reported national home sales fell 0.7% month over month in August, with the MLS Home Price Index unchanged from July and 3% below year-ago levels.
CREA projects the national average home price to rise 1.1% in 2026, though regional conditions remain uneven.
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