RBC says home affordability to deteriorate with rising mortgage costs
OTTAWA - The Royal Bank of Canada (TSX:RY) says the ability of Canadians to keep up with housing costs has actually been improving of late, but warns against complacency.
The Royal Bank's latest housing affordability measure shows home servicing costs relative to incomes actually fell in the last three months of 2013, bucking the deteriorating affordability trend of the previous two quarters.
But the relief will be temporary, the bank says in a new report, because mortgage rates are due to start rising this year.
In the fourth quarter, the bank estimates maintaining a detached bungalow at current market prices across Canada would have taken up 43.1 per cent of average household income, while the cost of a two-storey home would have claimed 48.7 per cent.
Both measures are 0.2 points lower than in the third quarter.
The RBC index represents the percentage of pre-tax household income that is needed to service the cost of owning a home at current market prices, including payments for a mortgage, utilities and property taxes.
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