Home sales across Canada are on track to set a new annual record for 2005 as consumers react to the prospect of higher borrowing costs for home mortgages.

The Canadian Real Estate Association reported Thursday that sales of existing homes totalled 41,724 on a seasonally adjusted basis last month, up 1.6 per cent from October. November's showing put the total on the year to date only half of one percentage point lower than the total for all of 2004, CREA said.

However, if interest rates rise as expected in the new year, activity will likely ease off as mortgage costs increase.

"With the bank rate hike in December and more increases expected next year, resale housing activity is expected to gradually drift lower in 2006 as homes prices continue to rise," said CREA chief economist Gregory Klump.

The Bank of Canada began raising its key lending rate in September to keep economic growth stable and contain inflationary pressures. The benchmark rate stands at 3.25 per cent.

"The small increase in mortgage rates in November may have prompted many prospective homebuyers to jump into market in order to take advantage of pre-approved mortgage rates," Mr. Klump said.

CREA also noted that the number of listings available for sale edged down in November by 0.8 per cent from October to 64,621.

"The decline in new listings and an increase in sales caused the national resale housing market to tighten in November compared to the previous month," the real estate association said.

Earlier this month, the Ottawa Real Estate Board reported that local sales of existing homes on the year to date are roughly on par with the first 11 months of 2004. Total sales for 2005 are expected to be on par or slightly lower than in 2004.