This is how much money you need to make to buy a house in Canada’s largest cities

The average income needed to buy a home keeps inching down in cities across Canada, according to the latest data.

Mortgage rates continue to decrease, and in a lot of cities across Canada, real estate prices have also been easing over the past few months.

That means, according to calculations made by Ratehub.ca, the salary needed to purchase a home in Canada has gone down again in October.

The calculation takes into account average home prices in each city as well as the requirements for qualifying for a mortgage at a bank.

Income requirements dropped in most markets, coming down by more than $4,000 in Vancouver, Toronto and Hamilton, Ont.

Of the major cities studied, only Fredericton went up last month. Its $1,890 rise in income requirements was due to its $16,100 month-over-month increase in average home price.

Home prices in most major cities eased or were relatively flat, with the exceptions of Fredericton and Victoria.

The salary needed to buy an average home in Vancouver dropped by the largest amount for the second month in a row, with Toronto close behind.

“While both of these cities saw a robust increase in sales activity in October, they remain well supplied, which has helped keep a lid on price growth,” according to the RateHub report. “That paved the way for recent interest rate cuts to further improve affordability, without being offset by rising home prices.”

On Oct. 23, the Bank of Canada cut its key lending rate from 4.25 per cent to 3.75 per cent.

A lower mortgage rate means the mortgage “stress test” is easier to pass. The test uses a mortgage rate two per cent above the rate a buyer is getting from a lender (or 5.25 per cent, whichever is higher) to gauge whether the buyer can financially handle a jump in mortgage payments.

The test factors in home price, annual salary and other debts and expenses to come up with a ratio that is essentially total monthly debts compared to total monthly income.

The Financial Consumer Agency of Canada’s Mortgage Qualifier Tool can be used to calculate the “gross debt service” and “total debt service” based on property value, down payment, mortgage rates and debts.

Note: The tool above uses recommended ratios (32 per cent for gross debt service and 40 per cent for total debt service) as a guideline. Ratehub’s calculations used the Canada Mortgage and Housing Corporation’s highest allowable ratios (39 per cent and 44 per cent, respectively).