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Toronto home prices reached another record high in March, but the pace of price increases has started to slow across the region.Graeme Roy/The Canadian Press

Toronto home prices reached another record high last month, but the pace of price increases has started to slow across the region as borrowing becomes more expensive.

The home-price index, which adjusts for pricing volatility and is the industry’s preferred measure of home values, reached a record $1,376,000 in March, according to the Toronto Regional Real Estate Board, or TRREB. That was a 2.7-per-cent rise over February and marked the smallest monthly increase since September. From January to February, the home-price index rose 6.4 per cent, and in the December period it was up by 4.3 per cent.

Much of the pandemic’s real estate boom has been driven by homebuyers aggressively competing for properties in the suburbs and semi-rural areas, where prices are relatively cheaper than the city of Toronto. Regions such as Durham, to the east of the city, and Peel, to the west, are up about 40 per cent in the 12 months to March. Halton is up about 30 per cent.

But from February to March, the home-price index for Halton fell 2 per cent to $1,475,100 after rising 7 per cent from January to February. In Durham, the price index climbed by 2 per cent last month, after jumping 8 per cent in the January-to-February period.

“The pool of willing buyers could be smaller this year,” said the board’s chief market analyst, Jason Mercer. “This type of trend, if sustained, can translate into a slower pace of price growth.”

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Across the Toronto region, the largest real estate market in the country, there were nearly 11,000 home resales last month. That was higher than February but 18 per cent below March of last year.

“If we take sales as a proxy for demand, then we can say demand has waned compared to last year,” said Mr. Mercer, who attributed this change in part to higher borrowing costs. Because last year’s sales were so high, he said that suggested some buyers made their home purchases earlier than planned.

Fixed mortgage rates were starting to climb even before the Bank of Canada raised its benchmark interest rate early in March. The five-year fixed mortgage rate, one of the more popular types of loans in the country, is now above 3 per cent, according to mortgage brokers. That is higher than 2019, when the five-year fixed was just below 3 per cent.

Laura Martin, chief operating officer of mortgage brokerage Matrix Mortgage Global, expects mortgage rates to continue to rise as the central bank has signalled it intends to raise rates to help combat soaring inflation. “Typical prepandemic rates were in the high 4-per-cent and low 5-per-cent range and are expected to ramp up,” she said.

In the Vancouver region, price growth also slowed. The home-price index hit a record $1,360,500. That was a 3.6-per-cent rise from February to March. But in the previous month, the index rose nearly 5 per cent. Home resales increased along with new listings, although were lower than last March.

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