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Across Canada, the average home price increased between 3.9 and 4.6 per cent in 2010s fourth quarter compared to 2009. Home values are expected to rise steadily through 2011 as low borrowing costs prompt more sales activity to occur in the first half of the year, according to the Royal LePage House Price Survey and Market Survey Forecast.

It is widely believed mortgage rates will rise in the second half of 2011. Trends in the housing market continue to be driven by the lingering after-effects of the recession, said Phil Soper, president and chief executive of Royal LePage Real Estate Services, in a press release. Canadians realize that interest rates are unsustainably low and that homes will become effectively more expensive when mortgage rates return to normal levels. We will likely see more price appreciation early in 2011 as some buyers complete transactions in advance of anticipated higher borrowing costs.

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Concern over rising consumer debt levels is prompting Ottawa to make three new changes to Canada’s mortgage rules.

Finance Minister Jim Flaherty announced Monday that new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 percent.

Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 percent from 90 percent of the value of their homes.

Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.

Though longer amortization periods reduce monthly payments, they greatly increase the amount of interest paid over the life of the mortgage and make it harder to build up equity. read more