Housing affordability in Canada remains one of the biggest challenges for homebuyers today. In July 2025, the average home price sat at $672,784, showing only a 0.6% increase from last year. The MLS Home Price Index, however, dropped 3.4% year-over-year, pointing to a flat and cooling market.

Even with interest rates beginning to ease, many buyers still struggle. High borrowing costs, slow wage growth, and a shortage of homes continue to put ownership out of reach for many Canadians.

So, the big question is, Can smarter mortgage strategies and alternative lending models help buyers succeed in this market? This blog breaks down the affordability problem and offers practical solutions you can actually use.

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Why Housing Affordability Is Still Out of Reach

1. Stagnant Wages vs. Home Prices

While home prices have slowed or stabilized in some regions, wages haven’t kept pace. This growing gap makes it difficult for buyers, especially first-time homeowners, to match purchasing power with current property values.

2. Borrowing Costs Remain High

Yes, interest rates are slowly coming down but they’re still well above early 2020s levels. On top of that, the mortgage stress test requires you to qualify at the higher of 5.25% or your rate plus 2%. This drastically reduces how much buyers can borrow.

3. Complicated Regulations

The stress test, designed to protect buyers, is now being questioned. The OSFI is considering a shift toward loan-to-income (LTI) caps, which would limit high-leverage loans to 15% of a lender’s portfolio. While this may help lenders manage risk, it adds another layer of complexity for borrowers.

4. Housing Supply Shortages

New builds are limited, zoning takes time, and demand continues to rise particularly due to immigration. Add in economic uncertainty and job insecurity, and buyer confidence takes another hit.

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Smart Strategies to Tackle the Market

Even with these challenges, there are ways to improve your chances of buying or investing in real estate. Here’s how:

A. Explore More Lending Options

Big banks aren’t always the best fit. Mortgage brokers like Cannect can connect you with alternative lenders such as credit unions and private options who may be more flexible and not bound by strict stress test requirements.

B. Think About Variable-Rate Mortgages

With rates trending down, a variable-rate mortgage might lower your monthly payments in the long run. It does come with risks, so it’s best approached with a clear plan and advice from a professional.

C. Use Your Home Equity Wisely

Already a homeowner? Tapping into your home equity with a HELOC or home equity loan can free up funds for debt restructuring, renovations, or even new investments without jeopardizing your long-term financial health.

D. Look Beyond Direct Ownership

If buying a property isn’t realistic right now, consider Mortgage Investment Corporations (MICs). These allow you to invest in real estate backed lending, offering returns and market exposure without the cost of direct ownership.

E. Keep an Eye on Policy Changes

Regulations are shifting from stress test exemptions on renewals to new portfolio-level rules. Staying informed gives you an edge when making big financial decisions.

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Final Thoughts

Owning a home in Canada isn’t just about luck, it’s about being strategic, adaptable, and proactive. While the market presents real challenges, solutions like alternative lending, equity utilization, and investment strategies can help turn affordability barriers into opportunities.

At Cannect, we specialize in bespoke mortgage strategies, unbiased advice, and alternative lending pathways crafted around your individual circumstances. 

Reach out today, and let’s co-create your path to homeownership, refinancing peace of mind, or real-estate investment growth.