The Bank of Canada as suspected has raised its overnight rate by basis points and the banks will most likley follow by raising prime to

This means if you have a 400,000.00 mortgage your payment will increase by as much $60/monthly.

With every 25 basis point increase you can expect $12-$15 dollars per 100,000.00 in mortgage amount.

We expect prime to continue to rise in 2010 and 2011. For as long as interest rates have been recorded 88% of the time people pay less interest with a variable rate, when the right mortgage plan is in place. We recently helped a young family reduce there mortgage from 30 years to 18 years even placing into consideration the antisipated increases.

What would you do with that additional savings? Call 604-802-3983 or introduce us over an email at acalla@dominionlending.ca to someone that you truly care about to see how we can help you today!

Bank of Canada increases overnight rate target to 1/2 per cent and re-establishes normal functioning of the overnight market

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe. The required rebalancing of global growth has not yet materialized.

In most advanced economies, the recovery remains heavily dependent on monetary and fiscal stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries – an important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.

CPI inflation has been in line with the Bank’s April projections. The outlook for inflation reflects the combined influences of strong domestic demand, slowing wage growth, and overall excess supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and to re-establish the normal functioning of the overnight market.

This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:
The next scheduled date for announcing the overnight rate target is 20 July 2010. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection

 Enjoy your week

Angela Calla, AMP,Mortgage Expert
Host of “The Mortgage Show” on CKNW 980 Saturdays at 7pm
DLCBC Mortgage Group Ltd.Tel: 604-802-3983
Fax: 604-939-8795
Toll Free: 1-888-806-8080
Email: acalla@dominionlending.ca
Web: www.angelacalla.ca

For most of her life, 56-year-old Royal City resident Jackie Olds thought owning a home was nothing more than a pipe dream.

The market in the Lower Mainland was spinning out of control. There was no way she could ever afford to own, she couldn’t pay for those tricky, hidden costs. Or, so she thought.

“During my last experience trying to rent a place it was just a nightmare,” she said.

“Everything was overpriced and filthy. I went to this one apartment and lifted up the bread board and it was covered in bugs. I left in tears.”

Once the tears dried up, Olds decided to sit down and take a long look at her budget and see if she could manage the daunting jump into home ownership.

“It’s so scary, you just never feel like you know you can do it,” laughed Olds, now the owner of a condo in New Westminster’s Brow of the Hill neighbourhood.

“But, if you do your homework and you don’t rush in, it’s amazing.”

Soaring prices

While Vancouver has become a place where real estate watching has become a sport of sorts—seemingly never-ending fodder for dinner party and water cooler chatter—those hoping to break into the market can feel overwhelmed at times.

According to the Real Estate Board of Greater Vancouver, the average detached home on the west side of Vancouver currently sells for $1.7 million. On the east side of the city, a detached home goes for around $746,000; in Burnaby, it’s $791,000.

But according to realtor Adam Goss, there are still attractive options for the first-time home buyer who doesn’t make $200,000 a year. The key is to equip themselves with a few tools before making that uncertain leap.

Goss said first things first: understand your finances.

Know where you spend your money and then decide what expenses you’re willing to part with to own a home.

For most, owning a home is a sort of forced savings plan, Goss said, and it’s going to affect your lifestyle.

“I recommend seeking a mortgage pre-approval and working off the figures provided to determine where buyers feel financially comfortable and what will be manageable.”

Find a neighbourhood

From there, the question arises as to which neighbourhood to live in.

Each presents its unique set of real estate hallmarks—from the type of housing available, to the cost, to the amenities you’ll find there.

For example, New West’s Sapperton neighbourhood has a number of 30-year-old condos. These buildings are generally wood-frame with shared laundry areas. These aspects tend to lower the price of a condo, with one-bedroom suites typically in the $165,000 to $185,000 range. For a two-bedroom suite, buyers will be looking in the $200,000 range.

Similarly, New West’s Brow of the Hill—below Sixth Avenue and west of Sixth Street––offers little in the way of new product. The bulk of buyers interested in this area will be looking at 20-year-old wood-frame buildings with one-bedroom units going as low as $150,000.

“The great thing for new residents in New West is the door to this community is wide open,” said Goss.

“Although we do hold on to our history tightly, and people are attracted to that, there is also more of willingness for change and a move forward these days. There are some exciting projects on the go.”

SkyTrain factor

Next door in Burnaby, new construction abounds.

Just over two decades ago, the area around the Edmonds SkyTrain Station—now known as City in the Park—was dominated by forest and ravine, so the buildings there tend to be newer, concrete structures.

In-suite laundry, gyms, saunas and unobstructed views of the mountains are all available, and will affect the value of a unit. Recently sold two-bedroom units in the area have gone for around $280,000, but some have gone for as high as $349,000.

Over in Burnaby’s Metrotown neighbourhood, the city’s busiest area, the first-time buyer will find much of the same.

Recently sold condos have gone for as low as $308,000 for a two bedroom, and the $325,000 range is the average. Where Metrotown separates itself from other popular areas with first-time buyers is its proximity to the mall and the commercial centre of Burnaby. Location within that corridor, however, raises the value of a property, according to realtor Doris Gee.

“People still, of course, work in Downtown Vancouver so living around the SkyTrain in Burnaby just makes sense,” said Gee, who’s been specializing in Burnaby properties since 1989.

“This convenience of Burnaby has always been attractive for this market. And the option to save on a vehicle is important.”

Watch hidden costs

Demographically, the average first-time home buyer in B.C. is between the ages of 25 and 32 years old.

According to Angela Calla, a mortgage broker with Dominion Lending Systems and the host of CKNW’s Mortgage Show, 70 per cent of the province’s real estate purchases last year were first-time buyers.

“The average income we were seeing last year was $45,000, either combined or from one person,” said Calla.

“And a five per cent down payment was the average from that same demographic.”

Calla advises the rookie buyer to be aware of a few of the hidden expenses, such as closing and moving costs.

On a $250,000 home, Calla says, these expenses, coupled with the five per cent down payment, can run as high as $14,000.

And while the financial hoop jumping of home ownership will remain a painstaking inevitability for most, Goss believes the final decision to become a homeowner is always a personal one no matter what the numbers may say.

“You will always end up having the choice on where you will live,” he said. “You’re not being told where to look anymore. Realtors are here to educate you in every step of the process and show you the factors that can affect your purchase. But you will decipher what it is you want and whether you can do it.”

JUNE 1 HIKE IN QUESTION

By Claire Sibonney Reuters   The negative news has led many to question whether Bank of Canada will start raising rates from their current record lows on June 1.

Yields on overnight index swaps, which trade based on expectations for the Bank of Canada’s key policy rate, have fallen in recent weeks and on Wednesday indicated just a 51 percent chance of a June 1 rate increase.

On April 20, when the bank removed its conditional pledge to keep interest rates on hold until the end of June, the market priced in more than a 90 percent likelihood.

Currencies tend to strengthen as interest rates rise as higher rates often attract capital flows.

“Even with the ongoing uncertainty, the Canadian situation warrants a small move toward more normal rates so I wouldn’t unwind the forecast just yet,” said Craig Wright, chief economist at Royal Bank of Canada., whose bank was the last primary dealer to join the call for a June 1 move.

“We’re really just looking at a 25 basis point adjustment … tapping of the brakes rather than slamming them on.”

OTTAWA – Neither recession, global uncertainty nor growing joblessness appears to have stayed Canadians’ appetite for spending money they don’t have.

A new report by the Certified General Accountants Association of Canada shows that household debt in the country kept rising through the recession and peaked in December at $1.41 trillion.

That’s $41,740 on average per Canadian, or debt to income ratio of 144 per cent that is the worst among 20 advanced countries in the OECD.

“This report is another indication of Canadians’ readiness to consume today and pay later,” says association president Anthony Ariganello.

“The concern is do they understand the full cost of paying later?”

The Bank of Canada has also voiced similar concerns, with governor Mark Carney having repeatedly advised Canadians to ensure they will be able to meet their mortgage commitments once rates increase. Ottawa has put that cautionary principle into effect by stiffening the means test chartered banks must apply when issuing open-ended mortgages.

Most Canadians don’t yet share that concern. The accountants’ survey found that almost 60 per cent of Canadians whose debt had increased still felt they could manage it or take on more obligations.

But the accountants say many households could find themselves in difficulty when interest rates, as expected, begin to rise.

The report estimates that even a small two per cent increase in rates would mean that mid-income and higher income households would have to cut their outlays on non-essentials by between nine and 11 per cent.

The finding is similar to one reached by the Canadian Association of Accredited Mortgage Professionals in a survey results release Monday.

The survey showed that while Canadians appeared well positioned to absorb higher rates, there would be a significant number that would come under stress. The mortgage professionals estimated that 475,000 households would be challenged if mortgages rates rose to 5.25 per cent, and that 375,000 were already facing pressure paying their bills.

The most likely outcome for a debt squeeze is that households will stop spending on non-essentials, and that could ripple in a general slowing of economic growth.

Household spending, particularly in the housing sector, was a mainstay of the economy during the recession. But as interest rates grow, a bigger percentage of household income may need to be diverting into paying off debt, meaning less cash for other purchases, like autos, appliances, furniture and clothes.

BMO Capital Markets economist Sal Guatieri says that is the flip-side to the Bank of Canada’s decision to slash rates to historic lows during the recession.

“That’s why we did not experience a great recession,” he noted. “That was the intention all along of the Bank of Canada, to get people borrow and spend. The problem is if that continued, Canada eventually would have a debt problem.”

But that is why the central bank is preparing to reverse course and start increasing the cost of borrowing, he added.

Most analysts believe Carney will start moving on rates on June 1 with a small quarter-point hike.

Courtesy of the Financial Post

Andrew Allentuck, Financial Post  Published: Thursday, May 06, 2010

Taking on a mortgage is a big commitment. Every buyer who uses a mortgage has the choice of floating or going with a fixed rate that often costs a couple of percentage points higher per year. Today, for example, one can get variable rates at an average rate of 2.34% while five year closed rates average 5.27%, according to Fiscal Agents Financial Services Group in Oakville, Ontario. Negotiated rates can be lower.

If rates never changed very much, there would be no contest – the floating rate deal would win. But rates do rise and fall and therein lies the borrower’s dilemma.

Borrowers with kids and an aging car fear that their ability to pay interest rates twice or thrice the current floating rates are limited. “The test is liquidity and risk tolerance,” says Derek Moran, a registered financial planner who heads Smarter Financial Planning Ltd. in Kelowna, B.C. “People with ample liquidity can afford to take a chance on rising mortgage rates. It follows that those who lack liquidity feel some pressure to avoid drastic interest rate increases.”

The point is not merely academic, for Canada, in spite of recent mortgage rate increases, is still at a relatively low point of rates over the last four decades. “There is more room for rates to go up than down,” Moran points out.

The cost of making a decision to float or go fixed varies with the rate differences.

In 2008, Moshe Milevsky, Associate Professor of Finance at the Schulich School of Business at York University, and Brandon Walker, a research associate at the Individual Finance and Insurance Decisions Centre in Toronto, published a study that measured the direct and opportunity costs of going with either choice. “Over the long run, homeowners really do pay extra for fixed rate mortgages,” they concluded.

The reason is intuitive. Lenders do not want to take the chance that when they have to refinance a loan that they will be stuck paying more than they are getting.

Mismatching what they lend with the cost of what they borrow can cut their profits and even lead to insolvency. So lenders attach what amounts to an interest rate insurance fee and bundle that into the price of money they lend on fixed terms.

Milevsky and Walker confirmed this explanation. “The study showed that a positive Maturity Value of Savings [the value of investing the difference between floating and fixed mortgages in 91-day T-bills] was positive the majority of the time, so the homeowner saved by using a variable-rate mortgage.”

The amount of money that the homeowner can save by taking a chance on floating rates varied in the Milevsky and Walker study, depending on the time periods in question. But the average amount was impressive: $20,630 as of 2008. Put another way, floating allowed borrowers to cut the time it would take to pay off the mortgages by a year or more, in some cases as much as five years on 15-year amortizations.

Rational calculation and personal feeling are, of course, different things. A person with a fixed income and a great deal of debt may be reluctant to put a rate casino between himself and the lender and will therefore go with certainty, even at a high price.

It is also a matter of experience. “First time buyers tend to pay close attention to the cost of the mortgage,” says Laura Parsons, Areas Manager of Specialized Sales – which includes mortgages, for the BMO Financial Group in Calgary. For them, the appeal of locking in is relatively high. Their mortgages are new, the amounts they owe are higher than they would be 10 or 15 years in future when the mortgage is substantially reduced, and their incomes, often early in their adult lives, are lower than they will be in future.

“First time home buyers are net debtors and they don’t want to endanger their finances,” suggests Adrian Mastracci, a portfolio manager and financial planner who heads KCM Wealth Management Inc. in Vancouver.

There are other strategies that the buyer can use to provide some rate insurance without taking on what Milevsky and Walker have demonstrated as the high cost of peace of mind.

“The buyer can take a variable rate mortgage but set payments higher than the minimum required” says Parsons. “That could be at the 5 year closed rate, which would mean a faster paydown and growing asset security while still keeping the low cost of the variable rate mortgage. Faster paydown is itself cost insurance if interest rates do rise.”

Banks are nothing if not inventive in helping clients cope with the fixed versus floating dilemma. For example, TD Bank offers to give 5% of the amount borrowed on a five or six year fixed rate residential mortgage to the borrower. The program, aptly dubbed the “5% CashBack Mortgage,” implicitly acknowledges that fixed rate loans can be more costly than variable rate ones.

For its part, RBC has a RateCapper Mortgage that builds on the initial low cost of a variable rate mortgage but limits the cost if rates shoot up. On a five year mortgage, the borrower will never pay more than the capped rate and if the variable rate, based on the prime rate, drops below the RateCapper mortgage maximum, the interest rate charged to the borrower also drops. The plan is a compromise and spreads interest rate risk. Many other lenders allow borrowers to mix fixed and variable rates, thus accomplishing a similar goal.

Plan selection, it turns out, is gender-related. According to a BMO survey, men, 44% of the time, are more likely than women to choose a fixed rate mortgage than women, who make that choice only 28% of the time. Women, it turns out, tend to make the better choice, for as BMO’s analysis shows, “fixed rates were advantageous during only two periods – through the late 1970s and in the late 1980s, in both cases ahead of a period rising interest rates, as is the case now.”

So where are interest rates headed? The yield curve, a line that links interest rates for periods of time from 1 day to 30 years, implies that rates will rise, but not very much.

There is no sense that we are returning to a period of double digit rates. Moreover, there are deflationary forces at work, notes Patricia Croft, chief economist of RBC Global Asset Management in Toronto. “The present crisis in European finance and the potential fizzling out of the present recovery in North American capital markets could presage falling inflation and even disinflation – the subsidence of rising prices and interest rates,” she explains..

BMO forecasts that the rising Canadian dollar will put downward pressure on consumer prices, reflecting the fact that much of what Canadians eat and use is imported. Inflation could flare up, BMO’s economists say, but there is a balanced risk of declining prices. For now, the Bank of Canada is being very cautious in its interest rate management commitments. For those who are strapped for cash, personal circumstance may dictate the choice of a fixed rate. But for everyone else, the folly of trying to make interest rate predictions over a business cycle and to predict both the short term rates and the long term rates along the yield curve should be apparent. No promises, of course, but the odds of saving money are with borrowers who choose variable rate plans or those that emulate them.

April 28th 2010

Royal Bank has raised its mortgage rates three times in a month and other banks are following suit.

What does this mean for your mortgage?

Here’s advice for those who are taking out a mortgage or renewing in the next few months.

Q: Now that rates are rising, should I lock in for five years?

A: Mortgage rates in Canada fell to record low levels. Such low rates were unsustainable, especially now the economy is coming out of a recession.

Even with the three recent increases, RBC’s five-year rate is now 6.25 per cent, compared to 5.5 per cent a month ago. It’s not that steep a climb.

You don’t know how high rates will go, but you can measure your ability to handle higher payments. I use an acronym called IDEAS for my checklist.

Income: Is your income steady and reliable? Is there a chance you’ll be out of a job for a while? Do you earn enough to pay your variable-rate mortgage as if it were a five-year fixed mortgage? (This will offset the effect of rising rates.)

Debt: Do you have a reasonable debt-to-income ratio? Your total debt should be no more than 40 to 42 per cent of your income. Are you close to exceeding this limit if your mortgage payments go up?

Equity: Do you have enough home equity? If you have at least 15 to 20 per cent equity, you can refinance the mortgage if necessary.

Assets: Do you have an emergency fund to act as a payment buffer if needed? The ideal is to have enough, in liquid assets, to cover six months of living expenses. Do you have a line of credit as a backup source of liquidity?

Satisfaction with risk: Can you accept risk? If you already have a variable-rate mortgage, your payments have been stable or going down. Can you handle payments rising by 25 to 30 per cent or more?

Q: I’ve heard that variable-rate mortgages save money over the long term. If I can handle higher payments, should I continue to float?

A: Variable mortgage rates are still very low. The average is 2.25 per cent.

Meanwhile, the gap between fixed and variable rates is widening.

For a five-year closed mortgage, the major banks are charging 6.1 per cent. (Remember that’s a posted rate, which is often discounted when using the services of a mortgage broker.)

Interest rates would have to rise quite substantially before you’d be further ahead with a five-year rate than a variable rate.

An example of a $250,000 mortgage, amortized over 35 years. He uses a five-year fixed rate of 4.39 per cent and a variable rate of 1.70 per cent, “both readily available rates for qualified borrowers.”

If rates rise by 3.25 percentage points over the next five years, who comes out ahead?

The variable-rate borrower wins – just slightly – with a balance of $232,399.92 and an interest cost of $52,376.59 over the five-year period.

This compares to a $233,026.43 balance and $52,631.23 interest cost (about $255 more) for the fixed-rate borrower.

Keep in mind that the rate increase used in this example (3.25 percentage points) exceeds the consensus view of economists by half a percentage point.

“The prime rate would have to rise over 50 basis points more than expected – and stay there – for a fixed mortgage to come out ahead mathematically. Very few are predicting that kind of scenario over the next five years.”

Floating also gives you flexibility. You’ll have to pay a penalty to sell or refinance during the five-year term.

That penalty can add up to thousands of dollars – and eat up much of your home equity – if the lender loses money by letting you out early.

So, don’t lock in if you have any doubts about where your future will take you.

The Globe and Mail Published on Thursday, Apr. 29, 2010

Interest rates are rising – we all get that – but it looks like the Big Banks are pushing things a bit with mortgages.

After a pair of increases in the past two weeks, the posted Big Bank five-year fixed mortgage rate now stands at 6.25 per cent. Does that seem high? In fact, it’s just half a percentage point below the average level for the past decade.

We’re supposed to be in the early phase of what could be a long cycle of rate increases. The Bank of Canada hasn’t even started raising its overnight rate, which sets the trend for borrowing costs other than fixed-rate mortgages. The overnight rate could very well start rising June 1 (that’s the central bank’s next rate-setting date), but even then it’s not dead certain that rates will move.

Mortgage rates are linked to bond yields, which have been rising for a while now. But mortgage rates have been moving faster.

Thanks to the always helpful Bank of Canada online interest rate database, we know that the yield for five-year Government of Canada bonds has averaged 4.03 per cent since the beginning of 2000. Five-year Canada bonds had a yield of 3.02 per cent yesterday, which means they’re three-quarters of the way back to their average of the past decade.

The 10-year average for posted five-year fixed-rate mortgages is 6.75 per cent, which means this rate is almost 93 per cent of the way back to its long-term average. There is zero consensus that things have normalized after the financial crisis, but the banks are just about all the way back to pricing mortgages as if they were.

And, no, this “go big or go home” attitude to rates has not been extended to guaranteed investment certificates, which are one source the banks use for the money they lend out as mortgages. The current posted Big Bank five-year GIC rate tops out at 2.1 per cent, or 63 per cent of its 10-year average rate of 3.31 per cent.

John Turner, director of mortgages at Bank of Montreal, said the banks are simply reacting to the rising rate environment in setting borrowing costs for mortgages.

“It’s not about any of us trying to get ahead of things, because the market won’t let us,” he said. “It’s a very competitive market.”

Mr. Turner cited two factors that have driven fixed-rate mortgages lately. One is an effort by the banks to anticipate higher bond yields and avoid repeated increases in mortgage rates. “We don’t like to move rates because it causes dissatisfaction, and it causes disruption in the sales force.”

The other driver of higher mortgage costs is the rising cost of providing interest-rate guarantees for people who are smart enough to lock in a rate as soon as they start looking for a home. Mr. Turner said these costs haven’t been a factor much in recent years because the general trend for interest rates has been downward. Now, with rates on a definite upward path, rate guarantees are a bigger consideration for lenders.

Banks won’t say this out loud, but their own internal business considerations help set mortgage rates as well. Sometimes, this works in favour of borrowers. In February, for example, the banks lowered mortgage rates even as bond yields rose a tick or two. Now, the banks seem to be in a mood to emphasize profits over market share or, as it’s known in bank land, widen spreads between what they charge and what they pay.

“The banks normally do this when interest rates are moving,” said David McVay, a financial services industry consultant with McVay and Associates. “But their retail profits have been pretty strong, and they widened spreads quite well when they put up line-of-credit rates [in 2008-09]. That was a big boost to profits right there.”

Mr. McVay seconded Mr. Turner’s comment about the mortgage marketplace being too competitive for banks to be out of line with their mortgage rates. In fact, there is a huge variation in rates right now that demands some shopping around from homebuyers and people facing renewals.

Garry Marr, Financial Post  

A new survey says more than four out of five home buyers feel comfortable with their debt, but another hike in interest rates might get Canadians squirming next time they’re polled.

Canada and Mortgage and Housing Corp. surveyed 2,503 mortgage consumers between Feb. 11 and Feb. 28 and found 81% were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have pushed the five-year, fixed-rate, closed mortgage from 5.25% to 6.25% in less than a month.

“Rates were low throughout most of the time [of the survey],” said Pierre Serré, CMHC vice-president of insurance products and business development, adding it was unclear whether the 81% figure might fall because of the hike.

Based on an average Canadian home-sale price of $340,920 in March and a 5% down payment, the minimum allowed, mortgage payments for a five-year, fixed-rate product have climbed almost 10%.

As it has throughout this rate-hike cycle, Royal Bank of Canada got the ball rolling Monday by adding another 15 basis points to its fixed-rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.

The hike means that a typical Canadian homeowner with a 25-year amortization with that $340,920 home and 5% down is now paying $2,120.54 per month in mortgage costs, up sharply from the $1,930.03 it was costing them before the latest hike in rates. The dramatic shift is likely once again to push people back toward a variable product linked to prime.

The same mortgage based on the current prime rate of 2.25% would cost only $1,410.84 to carry. Still, many economists predict the Bank of Canada will begin raising its rates as early as June, lifting the prime rate.

The survey also found homebuyers are relatively cautious when taking out their mortgages. Only 20% of them took out mortgages based on amortizations of longer than 25 years. CMHC also said 68% of consumers plan to pay off their mortgage sooner than current amortizations.

“In talking to some lenders I’ve heard of lots of people who get extended amortizations but accelerate their payments,” Mr. Serré said.

The survey came out the same day as new statistics from Re/Max which show the high-end of the housing market continues to soar. Re/Max surveyed 13 markets in the first quarter and found records for high-end homes sales in nine of them.

Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada didn’t think the latest hike in rates would do anything to slow the market. “It’s still minor. Interest rates overall, as far as I’m concerned, are still at historic lows,” he said. “Are they climbing up? Yes. It’s time to consider locking in. Are they going to skyrocket? I don’t think so.”

Bernice Dunsby, Royal Bank’s director of home equity, said the one percentage point rise in rates was not that large a leap on a historical basis.

“It has been widely anticipated that rates would be on the rise. The cost of funds just continues to raise,” said Ms. Dunsby. “The thing our clients are looking for is options that provide additional rate protection.”

She said customers have been opting for mortgage products that divide their debt in half, some of it going long and some of it going short. But the percentage of customers just going short continues to slide with variable rate products becoming less popular at Royal Bank.

Read more: http://www.financialpost.com/news-sectors/story.html?id=2952380#ixzz0mIZFfOdu

Julian Beltrame, The Canadian Press

OTTAWA – Inflationary pressures in Canada eased considerably last month, putting into question expectations that the Bank of Canada will be raising interest rates in a matter of weeks.

Statistics Canada reported Friday that Canada’s annual inflation rate slipped by two-tenths of a point to 1.4 per cent, and the closely watched Bank of Canada core rate fell even further — by four-tenths of a point to 1.7 per cent in March.

On a month-to-month basis, Canadians saw no increase in overall prices between February and March.

The agency said the big reason for the drops in both annual indexes was that the price-distorting Olympics ceased being a major contributor to inflation with the conclusion of the Winter Games at the end of February.

Prices for traveller accommodation soared 64.1 per cent in February, but in March they dropped back to earth to a more tame 2.8 per cent increase from March 2009.

Earlier in the week, the Bank of Canada cited inflationary risks for dropping its year-old conditional pledge to leave interest rates at record lows until at least July after the core reached as high as 2.1 per cent in February.

Economists had expected a slight slip in core inflation, once the Olympics ended, but the consensus was that core inflation would be right on the central bank’s target of two per cent.

March’s large fall now puts the core inflation rate, which excludes volatile items such as gasoline prices, well below the central bank’s target.

The March data suggests prices continue to be soft across many sectors with the exception of gasoline and everything else to do with cars.

Prices at gas pumps across Canada were 17.2 per cent higher in March than they had been a year earlier, overall transportation costs were six per cent higher, prices for the passenger vehicles rose 3.9 per cent and the cost of insuring them cost 5.5 per cent more. But food costs only advanced 1.3 per cent, mostly due to a 2.6 per cent hike in restaurant bills.

As well, consumers paid slightly more for household operations and furnishings, for health and personal care, reading, tuition fees, and cable and satellite services. But many items cost less this March than they did a year ago, including shelter costs and mortgage costs, clothing and footwear, as well as fresh vegetables, meat and fresh fruit.

With interest rates at record lows, mortgage costs were a full six per cent less in March than a year ago. Regionally, the agency said all provinces recorded a price increases, with the Atlantic provinces registering the biggest gains. http://news.therecord.com/article/701309