Rising housing prices combined with mortgage rates hitting a five-year high have created a double-whammy effect, making it more expensive than ever to get into the Canadian real estate market.
The average price of homes in urban markets has risen 10.2 per cent from a year ago, hitting $333,524 last month. That's the highest average price ever recorded by the Canadian Real Estate Association.
The real estate group also said that in April the average resale price of a home surpassed the $300,000 mark for the first time.
The new data released Thursday came as mortgage rates hit a five-year high -- rising for the fourth time in less than a month -- and threatened to keep climbing.
For those trying to buy a home, the new rates mean the popular five-year closed mortgage was at 7.44 per cent -- 0.85 percentage points higher than one month earlier.
RBC Economics' June housing affordability report stated that affordability in the nation's housing market was deteriorating modestly in all four types of housing tracked by the organization: standard two-storey homes, bungalows, townhouses and condos.
:
-
Housing affordability deteriorated the most in Saskatchewan, especially in Saskatoon, due to a moderately strong economy, rising wages and migration.
-
Conditions in Alberta, Saskatchewan, Manitoba and Quebec worsened, with affordability deteriorating in all four housing types.
-
Slight improvements were observed in affordability of standard two-storey homes in B.C. and Atlantic Canada and bungalows in Ontario.
-
But despite the higher cost of real estate, Canadians have not shied away from purchasing property. A record volume of sales were reported last month at 42,039 units. Those numbers marked an increase of 11.6 per cent over sales from one year earlier, The Canadian Press reports.
And there is no sign of the market cooling off, especially since the prime lending rate has remained at 6 per cent for over a year.
Borrowers now have to decide whether to lock in to a longer term mortgage in order to gain predictability, or to take short-term advantage of lower interest rates at the risk of a spike if rates rise.
Gregory Klump, chief economist of the Canadian Real Estate Association, told CP he advises buyers to get a pre-approved mortgage in order to take advantage of the lowest rate when the mortgage closes.
"That way, if rates go down the day your mortgage closes, you get the better of whatever the pre-approved rate is or the rate at that time, whichever is lower," Klump told CP.
Others recommend making the decision based on financial means and personal needs.
"You don't want to go with a variable rate and then have a lot of sleepless nights, worrying about interest rates going up," said Bob Dugan, chief economist for the Canada Mortgage and Housing Corp.
With files from The Canadian Press
