Less Affordable Housing

Canadian housing became a little less affordable last quarter according to a report released today by RBC.  “This represented the second consecutive quarter during which the costs of owning a home at market prices grew as a share of household income” read the report authored by RBC economists Craig Wright and Robert Hogue.

The main factors affecting affordability are rising home prices, higher mortgage rates and tighter lending rules, and over the past quarter we’ve experienced increases in all 3 of these measures.  Housing prices and mortgage rates are market driven factors while mortgage rules are controlled by the Department of Finance.

The tighter mortgage rules doled out by our Finance minister, Jim Flaherty, were intended to make housing less affordable to Canadians.  Mission accomplished.  With less affordable housing, Canadians will have to buy cheaper homes or save up larger downpayments before they can realize their dream of homeownership.  For some, this will put the dream of homeownership completely out of reach.

In our zeal to lower Canadian debt levels we are hurting low income earners and first time buyers working hard to experience their dream of home ownership.  The only saving grace is a mortgage rate hovering around its record low.  Rising mortgage rates will spell disaster for the Canadian economy.  Not because we are dependent of record low rates, but because our government has chosen to squeeze our mortgage rules to their tightest level on record.

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