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Consumer Prices Rise 1.8% in July; Effects on Home Buyers

Statistics Canada released a report Friday August 20, declaring that consumer prices have risen 1.8% in the 12 months to July. Energy prices rose 7.9% between July 2009 and July 2010. Within the energy index, electricity prices increased by 9.8% in July 2010 compared to the same month last year. As well, gasoline prices increased by 4.8% in July 2010 compared to July 2009.

A component of the Consumer Price Index, the mortgage interest cost index, which measures the change in interest payments on outstanding mortgage debt, decreased in July by 4.2%, following a decrease in June of 5.0%. What does this mean for home buyers? It means lower monthly payments on their mortgage. Interest rates have been steadily decreasing since 2007, represented by the recent moves major Canadian banks have made to cut interest rates. This trend will continue as long as banks are trying to attract new buyers into the slowing Canadian housing market.

Consumer Price changes by province:

Ontario experienced the largest increase in consumer prices with a 2.9% rise in the 12-month period to July. Prices for gasoline, electricity, and passenger vehicle insurance premiums went up. Ontario consumers also paid more for homeowner`s replacement costs.

Consumer prices in British Columbiarose 2.0% during the 12-month period to July. In July, electricity prices rose 36.7% and prices for food purchased from restaurants increased 7.5%. As well, prices at the pump and homeowner`s replacement costs went up.

Prices in Nova Scotiaincreased 1.7% in the 12 months to July. Higher prices were recorded for food purchased from restaurants, gasoline, the purchase of passenger vehicles, and cablevision and satellite services.

In Manitoba, prices declined 0.3% in the 12 months to July, following a 0.2% decrease in June. Lower prices for gasoline, natural gas and home and mortgage insurance were recorded in this province.