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It's the end of an era and a mad rush of desperate homebuyers flooded banks and brokers looking for the last good deal. Major banks posted their increases of almost 11% to 5.85 per cent on 5 year posted rates.

The rate increase comes as no surprise as it's just been a matter of when and how much. With the stirrings of life in our national economy and major gains in the past few months in the real estate market - not just in Metro Vancouver but also BC as a whole.

“People know rates are going up,” LeMay said. “The Bank of Canada said its overnight rate is going up. People put it all into one basket and think everything is going up.”

Monday's increases are the end of this particular portion of the government's economic stimulus plan. The finance minister Jim Flaherty voiced concerns over overheated housing markets and Canada Governor Mark Carney's worry over our debt levels, rates were expected to rise to slow the economy.

"Joe Santos, president of the Mortgage Brokers Association calculated that a family with $100,000 in household income, assuming they can negotiate a reasonable discount to posted five-year rates, would see their purchasing power reduced by about $40,000.

Before the change, he said, that family could qualify for a $614,000, five-year mortgage with 35-year amortization and a discounted mortgage rate of 3.89 per cent.

Now, however, the same family would likely face a discounted rate of 4.49 per cent, which reduces the maximum mortgage they could qualify for to $574,000."

“It’s obviously going to make it more difficult for people to qualify for Vancouver and Lower Mainland purchases, because property values tend to be higher here than in the rest of Canada,” Santos said.

Added to that, changes to mortgage qualification rules will also affect variable rate mortgages. Prime for now is at 2.25% but after April 19 buyers with only 5% down must qualify for a mortgage with the five year posted rate in order to get a variable mortgage.

The trend is now moving back to a fixed mortgage rate. For the last couple of years with variable rates at an all time low as many as 40% of homebuyers chose the variable rate.

What we all need to remember however, is that although we're not getting rock bottom rates we are still in good shape compared to just a few years ago. "Kevin Lutz, B.C. regional mortgage manager for RBC, noted that posted five-year fixed rates were 7.19 per cent two years ago, and the prime rate was 5.25 per cent."

Source: The Vancouver Sun