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Qualifying for a mortgage in Canada to purchase an average home exceeds household incomes in most major cities, a new study has found.
Rates.ca recently published a report that examined median household income and the income required to purchase the average-priced home in six major cities, including Calgary.
It then measured the difference — or gap — between the two metrics, expressed as the median income’s percentage of the income required to qualify for a mortgage for the average priced home.
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In Calgary, the median household income of $125,594 was nine per cent below the income of $137,000 required to purchase the average priced home of $588,600.
That’s far better than the national average where the median income of $101,652 was 49 per cent below the $167,000 in household income needed to purchase a home with an average price of $724,800.
Driving the national average are higher priced markets like Toronto and Vancouver. In Toronto, the median income of $115,378 was 57 per cent below the required income of $208,000 to purchase the average home. There, the average price was $1,097,300.
In Vancouver, the median household income of $115,790 was 65 per cent below the income of $227,000 to purchase the average home. That cost, the study noted, was $1,197,700.
Edmonton was the only city where the average household income was higher than the income required to purchase the average priced home. There, the median income was $119,402, 23 per cent more than the income needed to purchase an average home. Buyers in Edmonton needed $95,000 of annual income to qualify for a mortgage for a home worth $399,700.
The figures for Edmonton and Calgary were based on a five per cent down payment with a five-year, fixed-rate mortgage of 4.49 per cent. In Toronto and Vancouver, the down payment was 20 per cent with a mortgage rate of 4.89 per cent, given average prices exceeded $1 million. In turn, buyers need 20 per cent for a down payment. As well, the study added another 200 basis points to qualifying rates, as per federal stress test rules requiring borrowers be able to afford monthly payments two percentage points higher than offered mortgage rates.
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