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About a quarter of those with mortgages have rates tied to prime, so they are being immediately impacted by any increase in the overnight lending rate which prime tends to track. Most financial institutions had raised their prime rate by 3.2 per cent Thursday after it had been as low as 2.7 per cent two months ago.

Discounting is still a major factor, as lenders compete for an ever-shrinking market because of falling sales and prices and McLister says the best variable rate from brokers, who buy down their rate by eating into their commission is still 2.14 per cent if the loan is backed by Ottawa. The best variable rate deal from banks is 2.55 per cent, he said.

Consumers are also soon going to be hit by increasing rates on long-term mortgages which are priced based on government of Canada bond yields. The best five-year fixed rate from a broker for an insured mortgage is now 2.48 per cent and a typical discretionary five-year bank rate is up to 3.04 per cent.

“There is a delay in lenders (passing on increases) for five-year money. Lenders are seeing a slowing market and are trying to load the pipeline in advance,” said McLister.

For now, it appears consumers have jumped into the market to beat the latest rate increases, said Bill Whyte, senior vice-president with Ontario credit union Meridian. “It take a couple of days for things to move through on mortgages so that drives a little bit of input. We were quite busy,” said Whyte, who does believe market can withstand the rate increases and the tougher lending rules.

Benjamin Tal, deputy chief economist, has lobbied against the latest OSFI changes to the uninsured market because he thinks it’s just too much for the real estate sector to absorb. “They are getting a lot of feedback from the industry. I wouldn’t be surprised given the increase in rates and the slowing in Toronto, that we might see them not change but postponing the change,” said the economist.

gmarr@postmedia.com

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