Canada’s central bank found housing affordability eroded further in the first quarter. The Bank of Canada (BoC) Housing Affordability Index (HAI) showed a sharp jump in Q1 2022. Affordability is now the worst in 3 decades, with the most recent erosion due to rising financing costs. However, this is likely to be temporary as home prices adjust to more expensive borrowing costs. The index will see a short-term increase, but the trend can reverse as early as this year.
The Housing Affordability Index (HAI)
The BoC HAI looks at housing affordability as the basic carrying costs for a home compared to income. Carrying costs are mortgage payments and utilities. Mortgage payments are calculated using a basket of discounted rates, weighted by use. Income is disposable income, which is what’s left after mandatory transfers. The result is the share of income needed to carry these…
