The housing market is cooling, the stock market is reeling and to top it all off, consumers are now facing rising mortgage rates.

The increase means Canadian home owners are taking a direct hit from the subprime crisis, with banks passing on their higher borrowing costs to customers despite a rally in the bond market.

Volatility in stocks has led to a flight to safety, and an increase in government bond prices. This means lower yields on government debt, a trend that usually reduces borrowing costs for the banks, which in turn pass on the savings to consumers.

That trend is not playing out this time, however, as banks are instead being forced to pass on higher costs caused by the credit crunch to their borrowers, said Benjamin Tal, senior economist at CIBC World Markets Inc.

"It is costing banks more to get the money they lend to you. If they want to maintain profit margins, they have to transfer this extra cost to the consumer," Mr. Tal said.