Affordability in Canada’s housing markets is generally very good but interest rate increases could start to change that.

BMO’s Spring Housing Affordability Report also reveals the influence that Millennials have on the markets in Toronto and Vancouver, but also in those outside these hot markets as they seek more affordable options.

However, this influence is set to decline in the next decade, the report says, as the baby boomer homebuying era did in the late 90s.

“Millennial buyers and international migrants are cushioning the decline in detached home prices in the hottest markets,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “We expect millennials to also bolster other markets like Montreal and Ottawa, as those looking for better affordability consider options beyond Toronto and Vancouver.”

He added that interest rates are likely to rise 50 points in this calendar year, with the additional costs eroding affordability in those markets that have not been affected by the tighter mortgage regulations and other cooling measures.