Desjardins recently produced a report examining Canada’s homeownership affordability, using its Desjardins Affordability Index (DAI) to assess whether average household disposable income is sufficient to qualify for a mortgage on an average-priced home.
The report’s central finding is that while affordability has improved from its 2023 lows, that relief is already fading. The deterioration began during the pandemic, when exceptionally low mortgage rates fuelled a strong seller’s market and drove home prices sharply higher. The Bank of Canada then raised rates by 475 basis points in under 18 months, pushing carrying costs to record highs and the DAI to new lows. Since then, a combination of falling home prices, rising household incomes, and Bank of Canada rate cuts through 2024–2025 has partially restored affordability, but conditions remain strained, particularly in British Columbia and Ontario.
Provincially, the picture is uneven. British Columbia and Ontario continue to carry the heaviest affordability burdens, though falling prices in those markets have provided modest relief. Meanwhile, Quebec, the Prairies, and Atlantic Canada saw affordability deteriorate in 2025, as rising home prices outpaced income growth. At the municipal level, Vancouver and Toronto remain “impossibly unaffordable” by international benchmarks, with price-to-income ratios of approximately 15 and 12, respectively.
The report’s outlook is cautious, if not pessimistic. The Bank’s easing cycle appears to be over, bond markets are pushing fixed mortgage rates higher, and markets are now pricing in the possibility of rate hikes. At the same time, strong demand in relatively more affordable provinces continues to push prices up. As a result, the DAI is expected to plateau or deteriorate modestly through 2027 in most provinces. A downside risk scenario, where sustained oil price increases reignite inflation and force the Bank of Canada to raise rates in 2026, would further erode affordability, as higher mortgage costs would more than offset any price declines.
One potential counterweight to the affordability headwinds identified in the report is a suite of recently announced policy measures aimed at reducing new housing supply costs in Ontario. In late March 2026, the federal and Ontario governments announced a joint partnership to remove the full 13 per cent HST on new homes priced up to $1 million — representing a maximum saving of $130,000 per buyer — with partial relief extended to homes priced up to $1.85 million. In addition, the two governments committed to co-funding $8.8 billion over ten years in housing-enabling infrastructure, alongside reductions in development charges of up to 50 per cent for three years in municipalities covering roughly 80 per cent of Ontario’s population.
Because these initiatives are targeted at new builds, they unlikely to have much of an impact on the resale market in the near term. A material improvement in overall affordability would require these supply-side gains to be sustained over many years and accompanied by continued income growth.
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any person or organization in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice including investment advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication. Readers are cautioned to always seek independent professional advice from a qualified professional before making any investment decisions.
