Home prices have dropped since February - but mortgage payments are still higher?

We all know that the interest rate caused a big drop in home prices from their peak in February. The average home price in Toronto West was down from $1,699,095 in February to $1,364,437 in August, according to TRREB. But if you took out a mortgage in August, you are still looking at a higher monthly payment.

With a 5-year fixed rate at 2.45% in February for a mortgage of $1,359,276, you would be paying $6,055.31 monthly with a total interest paid in the period of $153,345. Whereas, with a 5-year mortgage of $1,091,550 in August at 4.70%, you would be paying $6,163.39 monthly with a total interest of $239,740.

With today’s prime rates around 5.45%, you would need the average housing price in the Toronto West area to drop below $1.25m before the mortgage payments fall below February. That is an additional 8% drop from our August numbers.