The U.S. isn’t the only country facing increasing mortgage rates. Several Canadian banks have increased their posted mortgage rates by .2% as housing value decreases are accelerating. For more on this, see the following article from Property Wire.
Residential property prices are continuing to fall and now there are fears that increases in mortgage rates could put off a lot of investors, especially first time buyers.
Canadian home prices fell 5.8% in March from the same month a year earlier, a faster pace of decline than in February, according to the latest published figures from the Teranet-National Bank National Composite House Price Index. It also shows that prices were down 8.5% nationally from the peak in August last year.
Western Canadian home prices were hardest-hit, with Vancouver leading with a 9.6% decline in March from a year earlier, while Calgary saw prices fall 8.4%, and Toronto saw a 6.9% slide. Halifax reported the smallest decline at 0.8%.
Montreal and Ottawa bucked the trend in March with property prices rising 2.9% and 1%, respectively. The index also showed home prices fell 4.1% year-over-year in February.
Analysts were confident that first time buyers were the key to recovery in the market but now Canada’s biggest banks are putting up key mortgage rates. Royal Bank of Canada, Bank of Montreal, Toronto-Dominion Bank, the Bank of Nova Scotia and Canadian Imperial Bank of Commerce are all increasing their posted rates on five-year, fixed-rate mortgages by 0.2% to 5.45%.
Paula Roberts, a mortgage broker with Mortgage Intelligence, said she hopes that buyers will not be put off by the new rates. She explained that the rises are coming from ‘abnormally low’ levels and there are still have plenty of opportunity to take advantage of lower borrowing costs because not all lenders will pass on the increases.
But there are fears that rates will go up even further as the government is concerned about inflation.
‘Certainly there is the recognition that interest rates are going to have to go up both because of the need to rein some of this monetary stimulus in once the economy gains traction and the level of debt that is being issued by governments,’ said Toronto-Dominion economist Grant Bishop.
And Canadians are borrowing less according to a report from Statistics Canada. ‘Net new mortgage borrowing contracted during the first three months of 2009, as investment in residential construction and activity in the resale housing market continued to decline,’ it said.
This article has been reposted from PropertyWire. View the article on PropertyWire’s international real estate news website here.