People walk past new homes for sale in Oakville, Ont. The average sale price of a Canadian home in February 2010 was $335,655 — an increase of 18.2 per cent in one year. (Nathan Denette/Canadian Press)

The majority of Canadian homeowners and homebuyers think house prices are too high, a BMO survey suggests.

The survey found that 71 per cent of current and future homebuyers considered houses too expensive. That was especially true in major urban centres.

Despite this perception that homes cost more than they should, the survey also found Canadians feeling more pressure to "buy now."

"Housing prices have risen 89 per cent since 2002 — vastly outpacing family income gains," said Sal Guatieri, a senior economist at BMO Capital Markets.

"But with a cooler market just around the corner, with rising interest rates expected, and the introduction of the harmonized sales tax in Ontario and B.C., prudence may be a good choice for many new entrants into the housing market."

Rates heading up

This week, a number of Canadian banks began hiking their fixed-rate mortgages, with the popular five-year term jumping by six-10ths of a percentage point to a posted rate of 5.85 per cent.

While most borrowers are able to get the posted rate chopped by more than a full percentage point, most discounted rates also moved up by the same six-10ths of a point.

The most recent figures from the Canadian Real Estate Association, which are based on national MLS sales, showed the average selling price in February was $335,655, up 18.2 per cent in the last year.

In some markets, the average selling price was breathtaking. For instance in Vancouver, the average home changed hands for $662,741 in February — up more than $120,000 from a year earlier.

Higher mortgage rates and the arrival of tighter mortgage lending rules are sending more first-time borrowers to independent mortgage brokers rather than banks, according to the Canadian Association of Accredited Mortgage Professionals.

Figures from CMHC last year showed that 42 per cent of homebuyers aged 25 to 34 used a broker.

New lending rules in effect Apr. 19

New mortgage lending rules coming April 19 will require buyers to qualify for a five-year, fixed-rate mortgage even if they plan to choose a lower-rate variable mortgage.

About one-third of respondents in the BMO survey said they'd lost sleep because of the stress of trying to buy a new home and about 15 per cent of prospective buyers said they'd been in bidding wars and had felt they'd often overpaid as a result.

The online survey was carried out by Harris-Decima between Feb. 16 and Feb. 22 and was based on a sample of 1,000 Canadians between the ages of 25 to 45 years who are either current home owners or are planning on purchasing their first home in the next 12 months.

With files from The Canadian Press