Mortgage interest rates were on the rise for a fourth consecutive quarter in Q2. As a
result, affordability worsened in no less than 7 out of ten urban markets which explains
the 12th consecutive deterioration of our urban composite index. Unsurprisingly, the rise
in interest rates hit harder for the priciest markets in the country (left chart). Thankfully,
income gains in British Columbia mitigated the impact on affordability for its two major
cities. Nevertheless, Victoria experienced a sharp deterioration in both condo and noncondo
segments as prices continue to swell despite more restrictive lending standards
imposed by OSFI since January. The slowdown in the resale market has begun to
impact prices in Vancouver and Toronto during the quarter. Indeed, home prices
experienced their weakest gain in almost four years in Vancouver while Toronto posted
a decline. That being said, both cities remain a painful environment for new homebuyers
(right chart) and this is unlikely to change in the short term as central banks remain in a
tightening mode.

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