Mortgage affordability worsens in Montreal

It’s not easy to buy your first home these days and the situation is only growing worse in Montreal.

According to a recent affordability report from mortgage brokerage firm Ratehub.ca, mortgage affordability worsened in April for 12 major Canadian cities and if you want to buy a home in Montreal, you now need a household pre-tax income of $128,240.

Realtor Mark-Andre Martel with Sutton Group says many first-time homebuyers are frustrated.

“Even though their buying power is diminishing slightly, prices of properties haven’t diminished yet,” he says. “The median price for condos remains at zero per cent fluctuation so far for this year.”

In April, the average home price in Montreal was $594,400, according to Ratehub.

Ratehub’s report shows a homebuyer would need $650 more income in April compared to March of this year, and an extra $240 in mortgage payments per year.

For its report, it factored in a 10 per cent down payment, with 25-year amortization, $4,000 in annual property taxes, and $150 per month in heating costs. It also took the stress test into account, as well as the average of interest rates at the Big Five Banks.

According to Ratehub’s mortgage director for Quebec, Philippe Simard, housing prices aren’t the only reason affordability is worsening.

“It’s really related to the interest rate going up a little bit because at the beginning of the year we got a rate around 3.59 (per cent) and now we are at the low 4 (per cent),” he says.

Martel adds that first-time homebuyers often put the minimum down payment and have little wiggle room.

“They’ll buy at the max amount. And so if the rate fluctuates by 0.5 per cent, that might mean $20,000 that they would have less to buy a property with.”

With so much uncertainty over the war in the Middle East, Martel says some buyers are nervous that rates will go up in the future.

Getting into the market could require some flexibility, such as looking further outside of Montreal, or opting to buy a condo.

“Sometimes, it’s just a mindset shift and not having all the boxes checked, but at least you get to buy a property and get into the market.”