Rise in Canadian housing starts linked to lowest rates since 1955

August 14, 2005|By BLOOMBERG NEWS

Canadian housing starts unexpectedly rose in July as low mortgage rates spurred home sales, the federal government's housing agency said.

Work began on 242,300 housing units at an annual rate last month, compared with June's 241,300, Canada Mortgage & Housing Corp. said in Ottawa.

Monthly home sales and prices have set records this year as the average rate on the five-year fixed mortgage dipped to 5.7 percent last month, matching a level set last year that was the lowest since 1955. The five-year rate is common in Canada, where mortgages are rolled over more frequently than in the U.S.

Low interest rates and pent-up demand from a lull in building during the last decade have helped construction, said Bob Dugan, chief economist at Canada Mortgage & Housing Corp.

"Low mortgage rates can really increase the level of construction activity beyond the level of household formation," Dugan said.

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