Homes sales across Canada rose for the fifth consecutive month and recorded a double-digit increase compared to a year ago in part aided by interest rates, according to the Canadian Real Estate Association.

However, sales in Vancouver and Toronto, the two largest domestic markets, remained “well below” the levels achieved before mortgage stress tests were introduced last year, the association said.

Sales rose by 3.5% in July compared with June and by 12.6% versus the same month in 2018, the association’s figures show. The Bank of Canada kept interest rates at 1.75% last month after raising them five times from 2017 to last Oct.

“After a challenging 18 months, the Canadian housing market is showing widespread signs of, not just stabilizing, but firming again,” BMO Chief Economist Douglas Porter said in a note to clients. “With global uncertainties driving borrowing costs lower again — Canada’s 20-year government bond stands at a record low yield today — the market is poised to receive a further fillip.”

House prices advanced 0.6% from June, the largest monthly gain in two years, and 0.2% from a year ago, according to the MLS Home Price Index. Ontario cities and Montreal were mostly responsible for the increase.

“The extent to which recent declines in mortgage interest rates have helped lift sales activity varies by community and price segment,” CREA President Jason Stephen said in a statement. “All real estate is local.”

The average transaction prices, which tend to be more volatile than the MLS index because they don’t take into account changes in the housing mix, rocketed 3.9 per cent compared with a year ago. Porter says the average price is still good leading indicator for the index and prices “are clearly headed higher.”

There was a first-quarter sales lull as buyers and sellers came to grips with last year’s regulatory measures on mortgages.

“We’ve now had a reawakening of sales for several months, Avery Shenfeld, Chief Economist at CIBC Capital Markets in Toronto, said by phone. “In addition, mortgage rates have been edging lower so the combination of the two is making for an active market.”

Ontario’s housing market continues to warm up, the data show. Niagara, London and Windsor led gains in prices with double-digit increases over a year ago while 6 of 7 reporting cities in Western Canada declined.

The number of new listings was almost flat, easing by 0.4% in July as increases in Calgary, Toronto and Edmonton offset a decline in BC and Montreal, CREA said.

“Sales continue to rise in housing markets where the mortgage stress test had little impact due to upbeat local economic conditions and a supply of affordably priced homes,” CREA Chief Economist Gregory Klump said in the statement.

“Meanwhile, the mortgage stress test is doing no favours for homebuyers and sellers alike in places facing challenging local economic prospects and subdued consumer sentiment.”

“A Reawakening” : Canadian Home Sales Rise for Fifth Straight Month as Mortgage Rates Decline by Colin McClelland | Financial Post