The average price of a home across the country continued to climb in 2016 but any savings Canadians are getting from mortgage rates are getting smaller, according to a new survey.

Mortgage Professionals Canada, the national mortgage broker channel association, said in a report out Thursday the average homeowner mortgage interest rate was 3.02% this year, down from 3.07% a year ago. For homeowners renewing their mortgage in 2016, the average interest rate was 2.7%.

Among borrowers who renewed this year, 64% have seen a drop in their interest rate but the average decline is about 40 basis points. Broken down, among about 950,000 borrowers who will have renewed or refinanced mortgages during 2016, 625,000 to 800,000 will have reductions in their interest rates, 100,000 will have no change, and about 225,000 to 250,000 will see an increases — most of those increases less than a percentage point.

“Mortgage rate discounting remains widespread in Canada,” the group said in its release. “So far this year, the average actual rate for a five-year fixed-rate mortgages was 2.72%, 1.94 percentage points lower than posted rates for the term which has averaged 4.66%.”

The posted rate for the five-year term has been key following government changes announced in October to stress test the market. Consumers with government backed loans must now be able afford a loan based on the qualifying rate set by the Bank of Canada, now 4.64%, which is based on the posted rate for a five-year fixed rate loan.

“It is too soon to measure the impacts of this policy change,” said Will Dunning, chief economist of Mortgage Professionals Canada and author of the report. “The survey finds that among potential homebuyers who expect to be subject to that test, their ability to buy a home will be impaired. As a result, they also expect that there will be negative impacts in the overall housing market and in the broader economy.”

The survey found that many first-time buyers are now looking to rent part of their to generate income so they can afford to buy a home. The study found 34% of recent first-time buyers think it is important to generate income from their properties and 13% went ahead with renovations on their homes to create a rental unit. Another 20% of first-time buyers either rent or plan to rent part of their homes.

Among the 18-34 year-old segment of the population, 50% do not own a home and 43% said they can’t afford the down payment which is a minimum of 5% for government-backed mortgages for the first $500,000 of a home price and 10% on the portion between $500,000 and $1 million. The head of Canada and Mortgage and Housing Corp. mused last month, during a speech in London, England, about increasing the size of down payments.

The second reason why young people are not buying was lack of financial stability with 29% citing it as a factor. Another 26% are waiting for prices to decrease.

The survey was conducted by Bond Brand Loyalty from October 21 to November 3 with a sample size of 2,000 Canadians.

Mortgage Rates May Finally be Bottoming Out in Canada by Garry Marr | Financial Post