Canadian mortgage payments are soaring as home prices hit record growth. Those payments might get more expensive for some as interest rates rise. It’s understandable that some are worried homeowners will face significant pressure. However, don’t expect renters to have any sympathy. As expensive as housing is, average mortgage payments are lower than the cost of rentals.
The Average Canadian Mortgage Payment Is Lower Than Rent
Canadian mortgage payments climbed sharply as home prices surged higher. Monthly mortgage payments reached an average of $1,390 in Q4 2021, up 3.0% from the previous quarter. Over the past five years, prices are 16.3% higher. A sharp climb, but still less than the average rental price for an apartment.
Average rental prices across Canada are much higher than mortgage payments. The asking price for a 1 bedroom apartment on average was $1,473 per month, while a 2 bedroom was asking $1,820 per month. Rising rates might not even push mortgage payments this high. We’re not even adjusting for unit size (today), with rentals likely being much smaller.
Existing Mortgage Payments Increased 16% Over 5 Years
Want affordable housing? Should have been born earlier, because existing homeowners are paying practically nothing. Existing mortgages have an average payment of $1,380 in Q4 2021, climbing a year before. Over the past five years, payments climbed a whopping 16.2% mostly due to new mortgages. Speaking of new mortgages, those payments are steep — but not rental steep.
Canadian Average Monthly Mortgage Payment
The average monthly mortgage payment for Canadian existing and new mortgages in the fourth quarter of each year.
Source: Equifax; CMHC; Better Dwelling.
New Mortgage Payments Are Up 17.7% Over 5 Years
New mortgages have low rates, but super-sized home price growth sent payments soaring. Monthly payments reached $1,560 per month in Q4 2021, up 5.4% from a year before. That brings the average payment on a new mortgage 17.7% higher than it was five years ago. Once again, still much lower than the average rental price.
Higher interest rates might seem unfair to mortgage borrowers, but it’s not really. When rates are below the neutral policy rate, it’s actually a stimulus amount of credit. This expansionary policy helps to provide more credit and drive home prices (and a homeowner’s equity) higher. Rising mortgages have a long way to go before they even reach the burden renters currently face.