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As borrowing costs have decreased across North America for much of this year, Canadian and American homebuyers have been able to enjoy greater affordability than in 2023. Still, home prices are generally higher than last year, prompting some to compare housing costs across the border. But is the grass always greener on the other side? How much do housing costs really differ for Canadian and American homebuyers?
Zoocasa calculated the average monthly mortgage payment in 50 cities, 30 in the U.S. and 20 in Canada, to see where borrowing costs are the most and least affordable between the two countries. All figures are represented in USD, with Canadian amounts converted accordingly.
Canada Has Higher Home Prices but More Affordable Mortgage Payments
The Bank of Canada has announced three interest rate cuts this year, lowering the overnight lending rate to 4.25% as of early September. Meanwhile, the U.S. Federal Reserve has implemented just one rate cut, reducing rates by 50 basis points in mid-September, leaving average 30-year mortgage rates above 6%.
Since Canada has implemented more aggressive rate cuts so far this year than seen in the U.S., the trajectory of mortgage rates in both countries has differed. The average 5-year fixed rate in Canada has steadily decreased since the end of 2023. In contrast, the U.S. has seen more volatility, with the average 30-year fixed rate rising from a low of 6.08% in September to 6.32% in October.
With this in mind, it's easier to see why average monthly mortgage payments in Canada are relatively more affordable than in the U.S. despite Canada’s generally higher home prices. For instance, at $905,693, Toronto has the fourth-highest home price among all 50 cities analyzed, but its average monthly mortgage payment is only the eighth highest on the list.
In fact, in 12 of the 20 Canadian cities analyzed, the average monthly mortgage payment is under $2,000. Saint John and Regina notably have average monthly mortgage payments under $1,000, while Pittsburgh, the most affordable U.S. city analyzed, has an average monthly mortgage payment of $1,172. Pittsburgh's median single-family home price of $236,100 is lower than in Quebec City and St. John’s, but its average monthly mortgage payment is about $100 more expensive.
This trend is also evident in mid-priced Canadian markets like Hamilton-Burlington and Kitchener-Waterloo. Both have median home prices around $600,000, yet their average monthly mortgage payments are $100 cheaper compared to Austin and Phoenix, where median home prices are $100,000 lower.
Comparing Sky-High Housing Costs on the West Coast
San Francisco is in a league of its own when it comes to mortgage payments. Despite having a median home price that's $16,000 lower than Vancouver's, the average monthly mortgage payment in San Francisco is over $1,000 higher. This is primarily because average 5-year fixed rates in Canada are currently much lower than in the U.S., where average 30-year fixed rates have started trending upward again. This brings the average monthly mortgage payment in San Francisco to a whopping $7,190, compared to Vancouver’s $5,702.
Of the 50 cities analyzed, only five have average monthly mortgage payments exceeding $4,000. They are all located on the West Coast: San Francisco, Vancouver, San Diego, Los Angeles, and Seattle. The next most expensive city for mortgage payments is Boston, with a median single-family home price of $793,400 and an average monthly mortgage payment of $3,937. At $798,149, Victoria has a median home price comparable to Boston's, but its average monthly mortgage payment is $800 cheaper.
City-by-City Snapshot: Comparable Prices, Varied Mortgage Costs
The Canadian market comes out on top for mortgage affordability in nearly every instance where two single-family home markets with similar median home prices are compared. For instance, Montreal and Baltimore have nearly identical median single-family home prices, with Baltimore at $428,600 and Montreal at $427,324. Despite the only $1,200 in median price, there is a $465 difference in the average monthly mortgage payment, with the average Baltimore homeowner paying $2,127 and the average Montreal homeowner paying $1,662.
Even in markets where the American counterpart has a lower median home price, as is the case with Houston and Edmonton, the Canadian market is still more affordable for mortgage payments. Houston’s median single-family home price of $351,600 results in an average monthly mortgage payment of $1,745, while Edmonton’s median detached home price of $366,995 results in an average monthly mortgage payment of $1,428.
Borrowing Costs Are Dropping Across the Board
Whether you’re shopping for a home in the U.S. or Canada, average monthly mortgage payments are coming down considerably compared to last year. In all 50 cities analyzed, the average monthly mortgage payment decreased from 2023, with Victoria (-21.6%), Barrie (-17.9%), and Niagara Region (-16.8%) seeing the largest percentage declines. This results in monthly savings of over $800 in Victoria, nearly $500 in Barrie, and over $300 in the Niagara Region. Vancouver also experienced a significant percentage decline in the average monthly mortgage payment, down year-over-year by 13.6%, resulting in an $898 reduction from 2023 to 2024.
In the U.S., the largest year-over-year declines in average monthly mortgage payments came from San Antonio (-15.1%), Denver (-12.5%), and Austin (-11.8%). However, no American city saw as large a monetary drop as Canadian cities, with Denver experiencing the biggest U.S. decline at $475, followed by Portland with a decline of $356.
Planning to enter one of these markets this fall? It’s important to speak with a local realtor who is familiar with your local real estate market. Give us a call today to discuss your home-buying plans.
Methodology:
Median single-family home prices were sourced from the National Association of Realtors in Q2 2024 and Q2 2023, while Canadian median single-family home prices were sourced from individual real estate boards using the most recent data. If median single-family home prices weren’t available in Canada, benchmark prices were used instead.
For the calculation, it was assumed a 20% down payment is made, the mortgage is taken out over a 30-year timeline (per term for U.S. borrowers, and amortization for Canadians). U.S. mortgage payments were calculated with a fixed mortgage rate of 6.32% in 2024 (the average for the week of Oct 10, 2024, according to FreddieMac), and a rate of 7.57% in 2023 (the average for the week of Oct 12, 2023, according to Freddie Mac).
Canadian mortgage payments were calculated with a fixed mortgage rate of 4.19% in 2024 (the best available rate on the week of Oct 7, 2024, according to Ratehub), and a rate of 5.49% in 2023 (the average rate for October 2023).
Taxes, insurance, heating, and other expenses and debts were not factored into the calculation. Canadian dollar figures were converted to US dollars at an exchange rate of $1 CAD to $.072 USD, the exchange rate for the week of Oct. 7 according to Forbes Advisor.
The post Canadian vs. U.S. Mortgage Payments: Why Canada Comes Out on Top appeared first on Zoocasa Blog.
