Zoocasa - This year kicked off with a hold of the overnight lending rate, and as a result, fixed rates have begun to come down. In October, the 5-year fixed mortgage rate peaked at 5.49%, but by January 2024 the rate dropped as low as 4.89%. High interest rates don’t just impact homeowners, they also affect the rental market. As interest rates have climbed over the past two years, asking rents have increased by 22% according to Rentals.ca. In this climate of rising rents and declining mortgage rates, Canadians are wondering if this year is the year to buy or rent.
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To find out how much more affordable it is to rent rather than buy, Zoocasa analyzed 26 markets across Canada and compared monthly rental prices and monthly mortgage payments using average prices in December 2023. Additional costs were not considered, such as utilities or property taxes. Rental price numbers were sourced from Rentals.ca and were calculated by finding the average price of one-bedroom and two-bedroom rentals. Monthly mortgage payments were calculated assuming a 20% down payment and a 5-year fixed mortgage rate of 4.84% amortized over 25 years.
Narrowing Gap: The Difference in Monthly Mortgage and Rent is Under $500 in 7 Markets
Out of all the markets we analyzed, one city stood out for its resale affordability: Winnipeg. The average rent in Winnipeg is $1,526, while the monthly mortgage payment based on the average price amount to $1,521 – $5 less than the average rent. Though this is the only market on our list that has an average mortgage payment less than average rent, Regina and Quebec City came very close.
The gap between average rent and average monthly mortgage payments is just $54 in Quebec City and $62 in Regina. Homeowners in Regina also benefit from having the smallest average monthly mortgage payment of the markets we analyzed, with Winnipeg and Quebec City closely following behind.
With an average home price under $400,000, it’s not surprising that Edmonton is the next most affordable market for mortgage payments. Edmonton has a difference of $253 between the average monthly rent of $1,444 and the average monthly mortgage payment of $1,697. As Calgary’s popularity continues to rise and pushes prices up, Edmonton is positioned as a more affordable alternative for those who may find themselves getting priced out of the Calgary market.
Rounding out the list of markets with less than a $500 gap between monthly mortgage and rent are Halifax, Montreal, and Saskatoon. However, Kingston, London, and Ottawa are not far behind as all have a gap of just over $500 between the average rent and average monthly mortgage payment. Of those, Kingston has the smallest difference, with average rent at $1,970 and the average monthly mortgage payment of approximately $2,494. That makes Kingston the most affordable Ontario market for buying a home, but when it comes to renting, St. Catharines and Windsor have it beat.
Improving Affordability as National Rent and Mortgage Payments Leveling Out
On a national level, the disparity between rental costs and mortgage costs is not that significant. For condos, the average rent is $2,340, while the average monthly mortgage payment is $2,417. That comes out as just a $77 difference, suggesting condo homeownership is still an affordable option for those looking to buy in areas with an average condo price comparable to the national average of $527,600. On the other hand, when looking at townhouses, the average rent is $2,354, while the average monthly mortgage payment is $3,023 – a difference of $669. The type of property and location are two major factors in affordability.
Even with the national average price of a townhouse at $660,000, buying one remains a more affordable option compared to buying a home at the benchmark price in most of Ontario or British Columbia, where average home prices are nearly double that. Vancouver is the only city we analyzed with an average monthly mortgage payment above $5,000, though it’s not the city with the largest gap between monthly rent and monthly mortgage payments. That title belongs to Surrey, which has a $2,565 difference between the average monthly rent and the average monthly mortgage payment. That’s followed by Burlington, with a $2,441 difference, and Brampton, with a $2,257 difference. The gap in affordability in Toronto is slightly less pronounced than in those cities, with a difference in rent and mortgage payments of $1,970.