New reports from bank economists find low interest rates are keeping Canadian house prices within reach of homebuyers in many markets — although Vancouver remains an exception because of its sky-high real-estate prices.

The Royal Bank’s quarterly report on housing trends, released early Friday, shows housing affordability improved slightly in the third quarter, after two consecutive quarters when things got worse.

RBC chief economist Craig Wright says a lower interest rate environment, which includes mortgage rates, is helping to reduce the cost of home ownership.

“Elevated uncertainty relating to the European sovereign-debt crisis and the downside risk for economic growth have contributed to keeping interest rates at low levels,” said Wright.

Those lower rates are helping to cushion the impact of rising home prices in many cities even as the economy slow and consumer confidence weakens.

The bank says affordability levels rose for all housing categories, although most improvements were less than one per cent.

“Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand,” said Wright.

Among the most marked improvements in affordability were for two-storey homes and bungalows in Montreal, two-storey houses in Manitoba, and detached bungalows in Vancouver, Canada’s most expensive housing market.

Royal’s affordability measure for Vancouver fell slightly from the previous quarter, but remained above 90%.

Toronto is next in the index at 52.1%, Montreal is at 40.9, Ottawa 40.8, Calgary 37.6, and Edmonton 33.2.

“The Vancouver area market continues to be a major exception, with sky-high property values in upscale neighbourhoods making it both extremely unaffordable and the most at risk of a downward correction,” said Wright

A reading of 50% means homeownership costs take up 50% of a typical household’s monthly pre-tax income. The higher the rate, the higher the cost.

RBC forecasts that interest rates will remain exceptionally low in Canada until mid-2012 and rise gradually after that.

“We expect to see further slowing in the pace of home price increases next year, as housing demand levels out,” Wright said.

“These factors will set the stage for a period of relative stability in affordability trends in Canada.”

BMO Capital Markets agreed in a commentary Friday that low mortgage rates are offsetting weaker consumer confidence and slower job growth.

“Relatively stable sales and price trends are likely in the year ahead,” BMO economist Robert Kavcic said.

He noted that there were sales gains in many parts of the country last month, including Regina, Calgary, Toronto and Montreal.

In contrast, Vancouver’s sales were one per cent below year-earlier levels and price increases have “mellowed” to 8.5%.

“Since peaking above $800,000 in June, seasonally-adjusted prices in Canada’s most expensive city have drifted down to $758,000 + partly due to fewer high-end sales — and B.C. is looking like more of a buyers’ market,” Kavcic said.

Meanwhile, Toronto continues to see solid growth with sales volume up 14.3% over the year-earlier period and prices rising by 7.8%.

“These numbers show that Canada’s real estate market remains resilient with opportunities for prospective buyers,” said Katie Archdekin, BMO’s head of mortgage products.

“That said, Canadians looking to buy or sell their home still need to ensure they stay realistic about what they can afford,” Archdekin said.