The cost of homeownership, relative to income, saw its steepest decline in a decade in the second quarter of 2019, according to the latest National Bank of Canada housing affordability report.

It took 45.1% of an average household’s income to afford the mortgage on a median-priced home in the 11 major cities covered by the report, down from 48.7% in just three months. Still, it’s well above the 30% mark that is generally considered affordable.

The last time affordability improved that much was during the 2008-09 financial crisis, due to a sharp slowdown. This time around, it’s due to falling mortgage rates, combined with rising wages.

In Toronto, it declined to 58.1% from 63.2%. In Vancouver, it stayed at 76.6%, but it’s still down from 83.2% three months earlier.

While mortgage payments are now easier to handle, buyers still need to clear the mortgage stress test rate, which has dropped by only 0.15%.

“Most potential buyers excluded by [the mortgage stress test] still are,” said Matthieu Arseneau and Kyle Dahms, National Bank’s economists.

However, those circumstances may not last as Canada’s most expensive housing markets – Toronto and Vancouver – are showing signs of acceleration. Home sales in both markets rose by 24% in July compared to the previous year.

Experts say that Canada’s housing market has adjusted to policies meant to cool excessive home price growth and borrowing, such as foreign buyers’ taxes and the mortgage stress test. In addition, borrowing costs are falling all over the world, which could push Canadian mortgage rates to new lows.

That has caused some to worry that the housing market could see rapid price growth again. For instance, Doug Porter, Bank of Montreal’s chief economist, urges policymakers to “be ready to wield some tough measures” to prevent a possible return to the heated home price growth seen in 2016-17, according to a HuffPost report.

“Domestic policymakers may need to consider other ways to control speculation — especially from abroad — in a world where interest rates stay below inflation, or even below zero,” Porter said in a client note last week.

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