January sees drop in income required to pass mortgage test
Calgarians required less income to afford the average price of a home in the city’s resale market despite prices rising in January, a new report has found. Ratehub.ca released its monthly data tracking home prices and income requirements based on the federal stress test that aims to ensure borrowers can afford higher interest rates on mortgages in the future.
It found that in January, despite the average price of a home increasing year over year $3,000 to $557,500, a buyer would need $3,350 less annual income to qualify.
Buyers required a household income of $117,100 to qualify for a mortgage to buy the average priced home in the city in January, based on a 20 per cent down payment, the study found.
The reason being is the stress test, set by the Office of the Superintendent of Financial Institutions (OSFI), decreased to 7.71 per cent in January from 8.16 per cent the previous January.
The OSFI measure is based on the average five-year, fixed-rate mortgage in Canada, plus two percentage points. In January, the average rate for a mortgage of this
type was 5.71 per cent versus 6.16 per cent in January the previous year.
Vancouver saw the largest income drop required, falling $9,620 in January year over year. There, buyers needed an annual income of $227,780 to purchase a home worth about $1.16 million. Driving the decrease was not only the stress test threshold falling year over year. Home prices in Vancouver also fell $7,400.
Edmonton also saw its average price fall $400 year over year to about $370,100, the Ratehub.ca found.
Income required, in turn, fell $2,700 to $82,730. That’s the lowest income requirement among Canada’s largest cities, only surpassed by Winnipeg ($78,110), Regina ($71,960) and Fredericton ($69,400).