Higher interest rates will raise homeownership costs.

We expect the Bank of Canada will resume its rate hiking campaign by the second quarter of 2011, which will eventually have a more sustained upward effect on mortgage rates. In our view, higher mortgage rates will be the dominant factor raising homeownership costs over the medium term. As a home buyer, the new rate changes WILL affect affordability to the tune of around $25,000. Assuming you can afford a 400k home, your affordability will decrease to 375k due to the shorter amortization allowable (30 yrs max) for those buyers with CMHC insured mortgages (conventional borrowing with 20% down can still go to 35 year amortization). The 35 year amortization is great because the monthly output is less, yet still allows you to put up to 20% of your mortgage amount down in any given year without penalty. Contact me for more information or if you have questions how it affects you.