Is 2026 the Best Year for Housing Affordability in Canada in a Decade?

For the first time in years, the math is starting to work for Canadian homebuyers.

Home prices are flat or declining in the country's most expensive markets. Mortgage rates have dropped significantly from their 2023 peaks. And a new generation of buyer-friendly policies including 30-year amortizations for first-time buyers and a higher $1.5-million insured mortgage cap are now fully in effect.

But here's the catch: this window may not stay open for long.

Several major bank economists are forecasting rate increases beginning in late 2026 or early 2027, which means the affordability gains Canadians are enjoying right now could erode just as quickly as they arrived.

So is 2026 actually the best year for housing affordability in a decade? Let's look at the data.

Eight Consecutive Quarters of Affordability Improvement — A New Record

According to the National Bank of Canada's Housing Affordability Monitor, housing affordability improved for the eighth straight quarter in Q4 2025 — the longest streak on record.

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The mortgage payment as a percentage of income (MPPI) fell to 51.6%, its lowest level in nearly four years. That's a meaningful improvement from the crisis levels of 2023, when the same metric exceeded 60% in several major markets.

RBC's affordability index tells a similar story: their aggregate measure has declined for seven consecutive quarters, with the latest reading showing the most affordable conditions since early 2022.

Still, neither index is anywhere close to the long-term average. National Bank pegs that historical norm at 40.5% since 2000, meaning a typical Canadian household still needs to dedicate more than half its income to mortgage payments, well above what's considered financially healthy.

Where the Gains Are Coming From: Three Converging Factors

1. Mortgage Rates Have Dropped Significantly

The Bank of Canada has cut its policy rate to 2.25% as of January 2026, down from 5.0% at the peak of the tightening cycle. Most major lenders now offer prime rates around 4.45%.

What's particularly notable is that variable-rate mortgages are now cheaper than fixed rates for the first time in three years. The best variable rate available is currently 3.45%, compared to a fixed-rate low of 3.94% — a crossover that's reshaping how buyers and brokers are structuring deals.

For a typical buyer, this rate environment is dramatically better than 18 months ago. On a $500,000 mortgage with a 25-year amortization, today's best variable rate saves approximately $290 per month compared to the peak fixed rates of 2023.

2. Home Prices Are Flat or Falling in Key Markets

Canada's national benchmark home price has now declined for eight consecutive months, sitting at $658,300 — down 4.9% year-over-year. The national average sale price is $652,941, down 2.6% from a year earlier.

The declines are particularly pronounced in the markets that matter most:

• Toronto: The average home price has fallen below $1 million for the first time since 2021, with condos experiencing double-digit year-over-year declines in several submarkets.
• Vancouver: While still Canada's most expensive city, the composite benchmark is down, and RBC notes that affordability has improved more quickly here than in any other major market over the past year.
• Single-family homes nationally: Down 4.6% year-over-year to $731,900.
• Townhouses/multiplexes nationally: Down 6.2% year-over-year to $596,100.

Meanwhile, Prairie markets like Calgary, Edmonton, and Winnipeg continue to see healthy activity, suggesting that affordability-driven migration is still pulling demand westward.

3. Policy Changes Are Expanding Buyer Capacity

Since December 2024, two significant federal policy changes have been in effect:

• 30-year amortizations are now available to all first-time homebuyers and purchasers of new construction, regardless of down payment size. This reduces monthly payments by roughly $300 per month on an average-priced home.
• The insured mortgage cap has been raised from $1 million to $1.5 million, opening up significantly more inventory in expensive markets like Toronto and Vancouver.

For a first-time buyer with a 5% down payment, the 30-year amortization increases their maximum qualifying purchase price from roughly $430,000 to $453,000 — not a massive jump, but enough to open doors in mid-tier markets and suburban communities.

It's worth noting the trade-off: a 30-year amortization on a $675,000 home results in approximately $116,730 more in total interest over the life of the mortgage. Lower monthly payments come at a significant long-term cost. If you're considering this option, it's worth reviewing the full breakdown of closing costs to understand the complete financial picture.

The Mortgage Renewal Wave: A Tailwind for Buyers, a Headwind for Owners

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One of the biggest stories of 2026 is the sheer volume of Canadians facing mortgage renewals.

According to CMHC, 1.15 million mortgage holders will renew this year, with another 940,000 in 2027. The Bank of Canada estimates that about 60% of all outstanding mortgages will have been renewed by the end of 2026.

The impact is significant: a fixed-rate borrower who locked in at 1.39% in late 2020 and renews today at the best available rate of 3.94% will see their monthly payment jump by approximately $576 (or $6,912 per year.)

This renewal pressure is one reason inventory has been building: some homeowners facing payment shock are choosing to sell rather than absorb the increase. For buyers, this means more selection and less competition.

If you're among those renewing, understanding the difference between mortgage renewal and refinancing is critical. Many homeowners make the mistake of simply signing their lender's renewal letter without shopping around  a decision that can cost tens of thousands over the next term. And if you do switch lenders, you'll need a real estate lawyer to handle the legal closing.

Why This Window Might Not Last

The affordability improvements Canadians are experiencing right now are real. But there are reasons to believe the window could narrow — possibly as soon as late 2026.

Rate Increases May Be Coming Sooner Than You Think

While the Bank of Canada has held steady at 2.25%, not all economists expect that to last. Scotiabank and National Bank both forecast the policy rate edging higher by Q4 2026. RBC projects rate hikes extending into 2027, with the overnight rate potentially climbing back toward 3.25%.

If that happens, the variable-rate advantage that's currently making mortgages more affordable could reverse quickly.

Trade Uncertainty Is Casting a Long Shadow

The CUSMA joint review deadline is June 2026, and ongoing tariff tensions between Canada and the United States continue to weigh on business confidence, particularly in Ontario's manufacturing and automotive sectors.

If trade disputes escalate, Canada could face what CMHC describes as a "mild recession" scenario — one in which investment drops sharply, government projects are delayed, and the economy doesn't recover to baseline levels until after 2028.

Immigration Changes Are Reshaping Demand

The federal government's lowered immigration targets could bring population growth to near zero in 2026 and 2027. While this may ease pressure on housing demand in the short term, it also reduces the pool of future buyers — which could weigh on price recovery, particularly in the condo and rental segments that have relied heavily on immigration-driven demand.

What This Means If You're Thinking About Buying

The data paints a clear picture: 2026 offers the best combination of mortgage rates, home prices, and policy support that Canada has seen since at least 2020, and arguably since before the pandemic.

But "best in years" doesn't mean "good" — housing affordability is still well above historical norms, and the structural challenges (underbuilding, high household debt, regional disparities) that got us here haven't been resolved.

If you're a first-time buyer, the confluence of 30-year amortizations, a higher insured mortgage cap, and relatively low rates makes this a window worth taking seriously — especially if you're buying in a market where prices have softened. Making sure you understand what to expect on closing day and the legal documents you'll need to sign will help the process go smoothly.

If you're a current homeowner facing renewal, the priority should be shopping your rate aggressively and understanding the full cost picture of refinancing versus simply renewing with your existing lender.

And if you're waiting for prices to drop further — they might. But if rates climb in 2027 as some economists predict, the monthly cost of that cheaper home could end up being higher than buying now.

The Bottom Line

Canada's housing affordability is at its best level in years, thanks to a rare convergence of lower rates, softer prices, and expanded buyer-friendly policies. Whether you're a first-time buyer, a renewing homeowner, or an investor reassessing your portfolio, 2026 presents a genuine window of opportunity.

The question isn't whether the window exists. It's how long it stays open.

Frequently Asked Questions (FAQs)

Q: Is housing affordability improving in Canada in 2026?A: Yes. According to the National Bank of Canada, housing affordability has improved for eight consecutive quarters — the longest streak on record. The mortgage payment as a percentage of income fell to 51.6% in Q4 2025, its lowest level in nearly four years.

Q: What are current mortgage rates in Canada in 2026?A: As of February 2026, the best variable mortgage rate in Canada is 3.45% and the best 5-year fixed rate is 3.94%. The Bank of Canada's policy rate is 2.25%, with most prime rates at 4.45%.

Q: Is 2026 a good time to buy a house in Canada?A: 2026 offers the best combination of mortgage rates, home prices, and buyer-friendly policies since before the pandemic. However, some economists forecast rate increases in late 2026 or 2027, which could narrow this affordability window.

Q: How does the 30-year amortization work for first-time buyers in Canada?A: Since December 2024, all first-time homebuyers can access 30-year amortizations on insured mortgages up to $1.5 million. This reduces monthly payments by roughly $300 on an average-priced home, though it increases total interest paid over the life of the mortgage.

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