INTEREST RATES: If mortgage rates rise, does the sky fall?

These days, my banker has the air of a man who could use a long drink and a short nap. He is up to his neck in anxiety-ridden clients. They're clamouring to renegotiate their lives.

By the dozens, they're abandoning the good-times crapshoot of the variable rate mortgage and signing on to the solid-citizen path of the dependable, and more dependably expensive, fixed rate. This is happening everywhere. It's like homeowners have discovered religion.

Meanwhile, that sound you hear is the clack of calculators determining just how much room homeowners will have left in their reconstituted budgets to do things like, oh, say, eat. In our part of the world, where a recent Conference Board of Canada report found that 67 per cent of Metro Vancouver households already "struggle with the high cost of housing," and devote 30 per cent or more of all income to shelter, the wiggle room would be, I estimate, diddly plus squat. I know it will be in mine.

How big is my mortgage? Enough to make me do calculations in my head to figure out how long between the time it will take me to pay it off and the time my retirement arrives, or when my heart attack kills me, whichever comes first.

But where am I in relation to the rest of the mortgaged homeowners out there?

That's a tough question to answer precisely. Banks have their own figures, and are loath to share them.

But a couple of other sources might give us a rough estimate of mortgage size in Metro Vancouver, or at least help gauge the scope of them. In a recent poll conducted by The Investors Group to find out if homeowners across Canada were concerned about the recent rate rises, the poll showed some 1,006 respondents with a median outstanding balance of $130,000 on their mortgages, which, considering where I live, seemed so improbably low it was enough to cause me to blow my morning coffee through my nose. The story about the poll, written for the Financial Post, came out of Ontario.

When I mentioned this to Sun business reporter Fiona Anderson, and that in my opinion the story had absolutely no bearing on the situation of homeowners here, she, out of her own curiosity, contacted the poll's authors and discovered that they had statistics specific to B.C., which did not appear in the Financial Post story. My thanks to Fiona for passing them along to me. To wit:

. Among all respondents, British Columbians reported carrying the highest mortgages, with a median amount of $180,000, or $50,000 more than the national average.

. Of respondents who said they had retired with debt, British Columbians were most likely to say their mortgage was the cause of the debt (62 per cent versus 51 per cent nationally).

. In B.C., only 25 per cent of respondents said they were "unconcerned" about interest rate hikes, compared to 35 per cent nationally. We lead the nation in mortgage-induced pants-wetting.

But that median mortgage amount of $180,000 was for all of B.C. What's the average price for a detached home in just Metro Vancouver now? About $650,000? And what kind of mortgages are banks and mortgage brokers writing for those homes nowadays?

Kevin Lutz, regional sales manager and mortgage specialist with the Royal Bank, said he figures new mortgages in the Metro area average around $350,000. Brian Peterson, president of the Mortgage Brokers Association of B.C., who canvassed some mortgage brokers in the Metro Vancouver area at my request, said local brokers were telling him it was not uncommon to see new mortgages in the $400,000-$450,000 range, typically for buyers who are stretching their borrowing powers to the limit so they might get into the market. Breath-taking sums, however inexact.

But does the rise in interest rates mean disaster for homeowners and the real estate market? Is panic warranted? Should you rush off to your banker and, if you don't have one already, lock into a fixed-rate mortgage?

Not necessarily. For all its volatility and Himalayan-like price ceilings, the Metro Vancouver market enjoys a core stability. Unlike the U.S., where the percentage of mortgages in arrears reached between five and nine per cent in the fourth quarter of 2009, in B.C., it was less than half of one per cent. In its latest forecast, the Canadian Mortgage and Housing Corp. is actually predicting home sales and prices will grow in 2011, though at a slower pace than 2010. Resale prices are expected to see "a modest growth."

As for the question of variable versus fixed, rates continue to be low historically. Homeowners still enjoy some breathing room.

"Before you called," said the Royal Bank's Lutz, "I took a look back at the rates for April 2008, which was pre-crash, in a very vibrant market, and the posted five-year fixed rate was 6.99 per cent. Our posted rate now for a five-year fixed-rate mortgage, after two increases in the last couple of weeks, is 6.10 per cent. The prime rate is now 2.25 per cent, when in April 2008, it was 5.25 per cent. So we're still at a very low interest rate market."

Will rates rise precipitously? Rise, yes. Precipitously, still unclear. Predictions I have seen figure a rise of one to two per cent more over the next year.

For some mortgage-holders, the ones so cash-strapped they have to rifle the loose-change jar, it's time to crunch numbers. But every homeowner, Lutz said, has a different story and a different set of circumstances to consider -cash flow, the level of security of employment, a winning lottery ticket in hand -and not necessarily everyone needs to jump over to a fixed rate. As yet.

His advice: Go see your banker or mortgage broker, as I am, on Saturday, loose-change jar and cap in hand.

(prepared by Pete McMartin/Vancouver Sun)