First time home buyers boost housing market this year

First-time home buyers looking to avoid higher interest rates are helping drive up the real-estate market in a number of Canadian regions, says a report issued this week.

Real-estate services firm Re/Max said the prospect of higher mortgage rates has prompted many of those determined to get into the market to act in the early part of this year.

It also noted the federal government's newly implemented conditions for mortgages -reducing the maximum amortization period for government-insured mortgages to 30 from 35 years and limiting the amount people can borrow when refinancing their mortgages to 85 from 90 per cent of the value of their homes -are prompting many to compromise on their expectations rather than diminishing overall demand.

"Many purchasers intent on realizing home ownership are scaling back on expectations or are willing to sacrifice location, quality and/or size to make their dream a reality, not unlike generations before them," said Michael Polzler, Re/Max's executive vice-president for Ontario and Atlantic Canada.

Led by the Bank of Canada's relatively low benchmark rate of one per cent, home buyers continue to enjoy low mortgage rates.

But that's not expected to last. Just this week, most of Canada's major banks hiked their mortgage rates, with standard five-year, fixed rates moving up 35 basis points to 5.69 per cent a year.

In Ottawa, while sales were off slightly from 2010 levels -1,613 sales between Jan. 1 and Feb. 28 this year versus 1,748 sales for the same time last year -the average price has jumped six per cent to $358,441.