We know that low rates have made housing more affordable on a monthly basis, and likely were the main reason that the crash in 2008/2009 was arrested and re-inflated. Considering that most real estate purchases are financed, rates are a critical component to determining whether our high prices can still be paid by Victoria residents.
However, just because low rates bring down the payments doesn't mean that the mortgage is equivalent, or that it carries the same risk as a lower mortgage at a higher rate.
For example take two 25 year mortgages with identical payments of $2000/month.
House price (20% down): $528,267
House price (20% down): $429,845
In both cases the payments are the same. However there are some key differences.
First there's the effect of rate increases. Assuming that after 5 years when you renew, rates have risen by 2%. Mortgage A is now at 5%, while Mortgage B is at 7%. Payments for Mortgage A increase by $373/month while the holder of Mortgage B only has to find an additional $341.
More important though is the effect of additional payments. Say Auntie Deardra passes away and leaves you $30,000 that you put against your principal. With Mortgage B that one-time payment saves you $63,000 in interest costs and cuts your amortization down to just over 21 years. With Mortgage A, poor Deardra's life savings will only buy you a $31,000 savings and an amortization of 22.5 years.
Same goes of course for any accelerated payment schemes. Bi-weekly payments with Mortgage A will save you $22,000 and 2.8 years. With Mortgage B you save a whopping $43,000 and 3.6 years.
On a monthly payment basis we aren't so far off historical norms. But as usual, a low rate environment means savers are punished and those that want to pay their mortgage off earlier will have a much harder time than previously.