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We're starting to get a picture of what mortgage rate increases do to household budgets.

If you're buying an average-priced home in Vancouver, the increase in five-year fixed-rate mortgage costs over the past two months could add up to something like an extra $1,824 a year; in Toronto, you're looking at $1,584. In a small market like Saint John, the extra cost would be close to $350.

The biggest question in housing today is what will happen when mortgage rates rise from the historic lows they've been at in recent years. We saw the very beginning of this in the final months of 2016 and the results are significant.

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The mortgage market is so fragmented today that it's tough to document what's happening with rates. There are deep discount lenders you access through mortgage brokers, plus alternative banks, trust companies and credit unions that discount aggressively and big banks that have all kinds of different rates – posted and discounted rates, plus the rates they negotiate with clients who haggle.

So let's look at averages. Data from RateSpy.com shows that on Nov. 8, the day of the U.S. election, the average rate on discounted five-year fixed rate mortgages for borrowers with a down payment of less than 20 per cent was 2.34 per cent. Earlier this week, the average was 0.37 of a percentage point higher at 2.71 per cent.

Surprisingly, the rise is a bit sharper for people who come up with a 20 per cent down payment and thus don't have to pay the premium for mortgage default insurance. Here, RateSpy data shows the average rate has climbed to 2.87 per cent from 2.44 per cent, a difference of 0.43 per cent.

Mortgage rates have risen for a couple of reasons, the first being a series of measures introduced by the federal government in an attempt to cool down the housing market. These measures either make it more difficult for borrowers to qualify for a mortgage, or they add to costs that are incurred by lenders and passed along to customers. One of the quirks of these new regulations is that they have resulted in some lenders offering slightly lower rates to people who have a down payment of less than 20 per cent than they do for borrowers at or above that threshold.

Another result of the new rules is that it's more expensive to refinance a mortgage, which can mean adding new borrowing to the loan or extending the amortization period. RateSpy's data shows the average rate for a refinancing has risen 0.5 of a percentage point since Nov. 8.

The other factor in higher mortgage costs is that rates in the bond market have moved up on the belief that U.S. president-elect Donald Trump will introduce economic policies that increase both growth and inflation. The rate on five-year government of Canada bonds has a huge influence on five-year fixed rate mortgages. RateSpy's data shows that five-year government bond yields increased 0.35 of a point between Nov. 8 and Jan. 9.

If you're renewing a maturing five-year mortgage in 2017, compare your rate with what's available today. It's quite likely you'll still be able to renew at a lower rate, even after the rise in mortgage costs of the past two months. In early 2012, a well discounted five-year fixed rate mortgage might have come with a rate of 2.99 per cent.

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First-time buyers are hit the hardest by the recent mortgage rate increase, notably in bigger cities. A couple that buys a house in Toronto at the November average price of $776,684 might be looking at an extra $132 per month, or $7,920 over five years. The increase in Saint John seems minor on an annual basis, but it does add up to more than $1,700 over five years.

We've seen mortgage rates move higher in the past few years, and then pull back to new lows because of lingering economic weakness. This could happen again, but it seems unlikely. Strong job creation numbers for December suggest a firming economy here in Canada, and then there's the Trump factor in the United States.

The rise of house prices in the past eight years is more than anything else a result of sustained low interest rates. We've just had a taste of what higher rates mean to affordability.

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