Lower mortgage rates combined with falling home prices made it easier to buy a home in several major Canadian markets in 2025.

An analysis by Ratehub.ca found affordability improved in eight of 13 cities tracked last year, as less income was needed to qualify for a mortgage on an average-priced home.

The improvement marked a reversal from several years of worsening conditions following the pandemic-era housing boom.

Ratehub said borrowing costs played a major role. The Bank of Canada cut its benchmark interest rate four times in 2025, following five cuts in 2024. As a result, average five-year variable mortgage rates fell sharply, while fixed rates settled into the high-three to low-four percent range.

Ontario Markets Lead Affordability Gains

Hamilton saw the largest improvement among the cities tracked. The average home price fell by more than $80,000 over the year, which helped reduce the annual household income needed to buy a home by roughly $18,600.

Toronto also saw a significant shift. Average home prices declined by about $75,000 in 2025, lowering the required qualifying income by nearly the same amount as Hamilton.

Despite the improvement, however, Toronto remained one of the least affordable markets in the country due to its high absolute prices.

Other Ontario centres showed mixed results. While price declines helped buyers in some areas, affordability remained stretched in markets where incomes failed to keep pace with housing costs.

Western Cities See Modest Relief

Vancouver posted one of the largest price drops among major cities, with average home values falling by more than $50,000. That decline reduced the income needed to purchase a home by about $15,000, though Vancouver continued to rank as Canada’s most expensive housing market.

Elsewhere in Western Canada, results varied. Calgary and Edmonton saw smaller affordability improvements, reflecting steadier prices and less dramatic rate impacts, while Victoria experienced modest gains that still left ownership out of reach for many buyers.

Five Cities That Became More Expensive

Many small and mid-sized cities are still seeing price growth, particularly on the East Coast and in the Prairies.

Homebuyers in Canada’s most easterly city, St. John’s, needed to earn $4,800 more last year compared to 2024 to qualify for an average house, while elsewhere in Atlantic Canada, Fredericton buyers needed to earn another $500.

Another $2,000 in earnings was required in 2025 to buy a house in Regina and Winnipeg compared to the previous year.

In Montreal, buyers required another $2,400 in income last year to qualify for the average house.

Outlook Remains Uncertain

Ratehub said improved affordability in 2025 was aided by slower sales and rising inventory in several markets, giving buyers more leverage. However, it warned the relief may be temporary.

With the Bank of Canada expected to pause further rate cuts and home prices projected to edge higher as demand returns, affordability could tighten again in 2026, particularly in high-cost cities.

Still, the report noted that 2025 offered a rare window of improved conditions for buyers across much of the country, even as housing affordability remains a long-term challenge.

Homeownership Became More Attainable in Eight Major Canadian Cities in 2025 by REM Real Estate Magazine