Canada Mortgage Market Update: Affordability Gains, Construction Trends and Market Activity

Canada’s mortgage and housing landscape is showing mixed signals as the year draws to a close. Recent data point to modest improvements in home affordability, a stronger housing starts report, and ongoing softness in home sales and prices. Together, these indicators offer a nuanced view of the market: progress is occurring, but underlying challenges persist for borrowers, lenders, and policymakers alike.

Housing affordability edges forward

One of the most talked‑about developments in late 2025 is the improvement in housing affordability. According to the latest analysis from the Royal Bank of Canada, the national affordability measure improved to 53.2% in the third quarter of 2025. While this represents the seventh straight quarterly improvement, the pace has slowed compared with earlier gains, highlighting that buyers are still feeling stretched. Lower mortgage costs have helped, but the modest nature of the improvement shows that affordability remains a constraint for many Canadians.

This metric matters because it combines mortgage rates, home prices, and household income into a single measure of purchasing power. Even as interest rates remain relatively stable compared with recent years, affordability improvements are not translating evenly across major markets. For homebuyers and brokers, this means careful planning and realistic assessments of long‑term carrying costs are key.

Housing starts show pockets of strength

Another dimension of the Canadian housing market is construction activity. In November 2025, housing starts jumped nearly 10% to 254,058 units on a seasonally adjusted annualized basis. Activity was robust in regions like Quebec, the Atlantic provinces, and the Prairies, which helped offset weaker starts in Ontario and British Columbia.

However, broader trends suggest that momentum is uneven. The six‑month trend slowed, and starts in larger urban centres actually saw a decline year‑over‑year. This dichotomy underscores the complex nature of Canada’s building landscape, while some regions are picking up steam, key population hubs still struggle to expand supply. For mortgage professionals, understanding where construction growth is happening can help forecast future demand and price dynamics.

Market activity and prices remain subdued

Despite affordability improvements and stronger starts, home sales activity remains soft. The Canadian Real Estate Association reported a 0.6% decline in national home sales last month, accompanied by roughly 2% lower average prices compared with previous months.

These trends suggest that buyers are cautious, even with more approachable borrowing costs. The dip in sales activity could reflect consumer hesitation amid economic uncertainty or tight financial conditions in certain regions. As a result, many prospective homeowners may be sitting on the sidelines until they see clearer signals of sustained price stability or stronger income growth.

What this means for borrowers and industry stakeholders

Borrowers: Current market conditions suggest a thoughtful approach. While affordability is improving, it’s incremental, so aligning mortgage choices with long‑term goals and stress‑tested budgets remains crucial. Buyers should engage with mortgage advisors to explore options that balance rate security with flexibility.

Lenders & brokers: The mixed signals in affordability and starts indicate that market segmentation is growing. Tailored advice that accounts for local conditions and individual financial profiles will stand out. Lenders may consider products that address varying risk tolerances and time horizons.

Policymakers: Continued efforts to expand supply in high‑demand regions and initiatives that support income growth will help translate affordability gains into real purchasing power.

Conclusion

Canada’s housing finance landscape at the end of 2025 reflects incremental improvements paired with persistent challenges. Affordability gains are modest, housing starts are uneven, and market activity remains subdued. For all market participants, from homeowners to mortgage professionals, the key will be actionable insight grounded in local conditions and sound financial planning.