07:27 AM EST, 02/20/2026 (MT Newswires) -- Canadian housing affordability improved again in Q4 2025, marking an eighth consecutive quarterly gain, the longest streak on record, said National Bank of Canada.

The mortgage payment as a percentage of income fell to 51.6%, its lowest level in almost four years. Even with the recent improvement, affordability remains well above the long-term average of 40.5% since 2000, noted the bank. The latest progress in affordability came despite a modest increase in national home prices, the first in three quarters.

The five-year mortgage rate reversed the prior quarter's four-basis-point increase, declining by the same amount in Q4. This represented the seventh improvement in financing costs in the past eight quarters, offering a slight boost to affordability, stated National Bank. With this latest movement, borrowers are financing at rates about 22 basis points lower than a year earlier.

Income gains, however, contributed more to the improvement in the quarter than changes in interest rates. Although incomes have lagged home price growth in recent years, the gap has been narrowing, and the home-price-to-income ratio now stands at its most favorable level in five years, pointed out the bank.

Affordability trends varied across regions. Vancouver and Calgary posted the largest quarterly declines in the mortgage payment as a percentage of income, helped in part by lower home prices. Toronto also enjoyed a sharp improvement despite the stabilization in home prices. In contrast, affordability worsened in Quebec City and Ottawa-Gatineau, where price growth more than offset the impact of higher incomes and lower financing costs.

Most of the improvements in the last year have occurred in the markets that were the most stretched, rather than in areas with relatively more affordable housing, added National Bank. This pattern may continue in 2026, as ongoing softness in the Toronto and Vancouver resale markets doesn't suggest an imminent rebound in prices, especially with the ongoing slowdown in population growth.

Looking ahead, assuming tepid home price increase changes over the next year at the national level, income growth is expected to remain the primary driver of further improvements in affordability, as interest rates are unlikely to provide much additional support, according to National Bank.

The Bank of Canada has indicated it is comfortable with its current stance on monetary policy and persistent government deficits worldwide could exert upward pressure on longer-term yields.