TORONTO (Reuters) - Housing in Canada became easier to afford in the third quarter, the first drop in costs in more than a year, helped by lower mortgage rates and some softening in home prices, according to a study by Royal Bank of Canada.

After four consecutive quarters of rising home-ownership costs, the report by Canada's biggest bank found that affordability measures eased at the national level by 2.4 percentage points for a detached bungalow and 1.4 percentage points for a standard condominium.

Standard two-storey homes posted the greatest decrease, down 2.5 percentage points, according to the quarterly Housing Trends and Affordability index report released by RBC Economics.

The index measures the proportion of pretax household income needed to service the cost of owning a home. The lower the measure, the less costly it is.

Although home prices declined during the quarter, they were still 5.8 to 6.8 percent higher nationally than in the year-before quarter. Recent data has suggested a soft landing for Canada's once red-hot housing sector and that stable conditions are emerging.

A drop in fixed mortgage rates in the third quarter also helped to lower costs. Five-year posted rates fell more than 0.5 percentage points to an average of 5.52 percent, the report said.

But rates will rise again next year if, as expected, the Bank of Canada resumes raising interest rates. This might pressure affordability levels, although a more robust Canadian job market may soften the impact.

"Higher mortgage rates will be the dominant factor raising homeownership costs beyond the short term, although increasing household income ... will provide some positive offset," said Robert Hogue, a senior economist at Royal Bank.

"We expect housing demand and supply to remain mostly in balance overall, setting the course for very modest home price increases."

All provinces saw improvements in affordability in the third quarter.

(Reporting by Ka Yan Ng; editing by Peter Galloway)