Canada’s Mortgage Mayhem From Higher Rates? It Was Just $61

Canadian mortgage financing costs are surging, proving concerns of diverted disposable income. Equifax data from the CMHC shows the average monthly mortgage payment surged in Q2 2022. Rising interest rates are responsible for most of the climb in the previous quarter. However, growth was only a little faster than low rate-driven price growth a year before. The big difference? Experts see rising rates actually improving affordability in the coming months.

Canada’s Average Monthly Mortgage Payment Is $61 Higher Than Last Year

Canada has seen the average mortgage payment accelerate in growth, but not by much. Monthly commitments rose to $1,458 per month in Q2 2022, an increase of 4.5% (+$61) from last year. The increase is probably not the crushing amount people, and the media, have been hyping up. Especially when contrasted with the rate of growth a year before. 

Canadian Average Monthly Mortgage Payment

The average monthly mortgage payment for a Canadian household in Q2 of each respective year.

Source: Equifax; CMHC; Better Dwelling.

Mortgage payments this year might be driven by rates, but low rates also drove costs last year. In Q2 2021, annual growth of the average monthly payment was 4.2% (+$55) per month. Interest rates plummeted to practically nothing, average mortgage payments surged due to prices. This year’s growth is only 0.3 points, or $6 per month, faster than last year. In this inflationary environment, the diverted disposable income may not raise a brow at the aggregate level.

Canadian Average Monthly Mortgage Payment Growth

Annual growth of the average monthly mortgage payment for a Canadian household in Q2 of each respective year.

Source: Equifax; CMHC; Better Dwelling.

Toronto Has Seen Payment Growth Slow Over The Past Year 

Toronto real estate is seeing the average mortgage payment actually slow in growth. Monthly payments reached $1,987 in Q2 2022, up 5.4% (+$102) from last year. Last year it grew 5.7% (+$101), even higher than this year’s climb. Both years are unusually high growth and problematic, don’t read that incorrectly. However, higher rates are proving to slow growth compared to discounting them.

Vancouver’s Average Mortgage Payment Increased $97 Per Month

Vancouver real estate has seen a slight acceleration in growth from higher rates. The average monthly payment rose to $2,089 in Q2 2022, up 4.9% (+$97) compared to last year. In Q2 2021, annual growth came in at a slightly slower rate of 4.8% (+$92). Once again, this is a massive and unusually large increase for both years. Rising rates and just-off-record prices led to nearly the same growth as low rates last year.  

Rising costs aren’t as important as the speed and velocity that payments rise. Many people will still renew at higher rates if they bought at the record low. This will divert more disposable income from the economy for debt servicing. However, if it happens over time it’s much less of a concern than a sudden jump. The longer it takes to renew, the more principal will be paid down, leaving smaller balances. There’s also tools such as extending the amortization if payments are too much for the homeowner.

Concerns about rising rates diverting disposable income from the economy are valid. However, low-rate driven excess demand was driving prices higher and creating that same issue. Today’s rising rates are primarily a concern because low rates drove prices so high. This is expected to emphasize the rate hike in the near-term.

The difference is this time it’s not expected to be a long-term erosion in affordability. This week National Bank warned of the biggest erosion of affordability in 4 decades. It was primarily attributed to rising financing costs, as well. They don’t expect it to last, as home sales fell back to normal, 2019-levels. The Big Six bank sees prices falling to improve affordability soon.



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  • Remington 2 years ago

    They’re telling you don’t complain about higher interest rates it’s only a $60 extra a month. Wait until everyone starts to renew next year. I love these sugar coated feel good stories.

  • Michael 2 years ago

    Hey Daniel, is the quote, “They don’t expect it to last, as home sales fell back to normal, 2019-levels.” attributed to you or to National Bank? Most notably I am intrigued by anyone calling 2019 levels, “normal”. I think your numbers prove that normal hasn’t existed relative to real estate prices in Canada since around 2005. Cheers.

  • Chris 2 years ago

    Wait until people start renewing their COVID mortgages in 2025. I and many of my friends got fixed rate mortgages at less than 2%. Even if mortgage rates are retreating by then, renewing at 5% plus is gonna sting.

    • J 2 years ago

      Yep, especially if the market value is now 20-30% less than their loan owning. It will be hundreds of thousands of dollars to make up the difference – forcing a lot of people to sell at a loss. Their only salvation is the BoC lowering rates to drive up the bubbles again – which would be the craziest move they can do.

  • LarryMotuz 2 years ago

    I wish this article had included median rates of increase in monthly payments or a quintile distribution. Averages are deceiving without knowing who is being impacted and by how much.

    • Tim 2 years ago

      Median doesn’t have an impact on the loss to the economy. Not a lot of people paying a smaller mortgage to skew it lower anyway. m

  • D. Tam 2 years ago

    Torontonian has a lot of money, house price won’t go down much.

  • Ray Van 2 years ago

    I believe many people with variable mortgages pay a “fixed” amount every month, so if rates go up the payment is the same in terms of total dollars – but less is applied to principle and more goes to interest. Not sure if that was factored in here (it just looks at average mortgage payment). Also as others have mentioned, anyone with a fixed rate mortgage that isn’t up for immediate renewal won’t be affected yet (emphasis on yet). Oh yeah, and one more pretty important point, the article is comparing Q2 data – the Bank of Canada only raised rates by 50bps April 13, 50bps June 1, & 100bps July 13. So the largest hike isn’t even factored into your analysis! I’m not sure the writer fully understands the situation.

  • B Thompson 2 years ago

    Please quit complaining about interest rates! Our mortgage in the 1980’s was 24%!

    • denise 2 years ago

      The cost of houses in the 80’s was also insignificant compared to todays home prices. You could buy a fully detached home in Toronto for under $500k in the 80’s. you couldn’t get a bachelor condo for that price now!

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