The five-year benchmark rate saw its single largest quarterly increase in nearly three decades
Rising rates are largely to blame for the deterioration in housing affordability this year, according to the National Bank of Canada.
The effect was particularly notable in the five-year benchmark rate, which registered an increase of 123 basis points in Q2, per NBC’s calculations. This represented the single largest quarterly change in nearly three decades.
“This increase has propelled the benchmark mortgage rate to its highest level since 2011,” NBC said. “To give an idea of scale, a 123bps increase represents a surge of 14.4% for mortgage payments on the national composite, or an extra $500 a month, assuming no change in house prices.”
Read more: Canada home sales feel impact of rate hikes
“Subsequently, we are noticing a considerable slowdown on the resale market, with home sales now 12.8% below their 10-year average,” NBC added.
However, things might begin to look up on the affordability front sooner than later.
“This downswing should translate into lower home prices in the months ahead, with our current forecast calling for a 10% decline,” NBC said. “This development, combined with a stabilization of the benchmark five-year mortgage rate, should improve affordability before the year ends.”
