MORTGAGE rates in Canada tumbled more than half a percentage point, but industry watchers do not expect the rate relief to boost the country's moribund housing market. The rates fell for the third time since the start of the year, taking the five-year mortgage to its lowest point since last spring. One-year loans fell to a six-month low of 8.5 per cent and five-year rates to a one-year low of 8.875 per cent. Observers said they doubted whether the lower borrowing costs would bolster house sales this spring, traditionally the busiest time of the year. They also did not expect much improvement in Canadian resales until late this summer. On the construction front, housing starts in Canada improved slightly in April, but were 30 per cent lower than year-ago levels. That activity was also the lowest since the 1982 recession, according to recent figures from Canada Mortgage and Housing Corp. Real estate analyst Frank Clayton of Toronto said: 'the numbers are dismal . . . and show an extremely depressed level of [building] activity.' His views are shared by Bruce Clemmensen, president of the Canadian Home Builders' Association, who agrees falling mortgage rates alone will not restore consumer confidence in the Canadian economy, or convince them to make big-ticket expenditures, namely houses and cars. British Columbia posted the best record for building activity last month, with a 35 per cent jump in starts, due mainly to strong condominium construction in Vancouver. Ontario was hardest hit, suffering a 20 per cent drop in activity to the lowest level in four years. But while a cloud of pessimism hangs over most of the real estate sector in Canada today, some realtors and builders are doggedly optimistic that a recovery is in sight. Real estate agents in Toronto and Vancouver report increased traffic at open houses, and many are hopeful that will turn into firm sales if mortgage rates and house prices stay low. Mr Clayton estimated a cut of one-half a percentage point would mean an additional 50,000 renters could afford to buy a house. Some builders, too, see signs of better times ahead. Toronto-based Viceroy Homes recently signed a potential multi-million-dollar deal with Sanyo Electric to ship manufactured homes to Japan over the next five years. Viceroy, Canada's largest builder of manufactured homes, hopes to ship 150 kits, at C$50,000 (about HK$285,000) a pop. The surge in exports will boost Viceroy's financial statement. In the nine months ending December 31, 1994, the company lost $1.4 million on sales of $25 million, because of the sagging Canadian real estate market. In other news, the liquidators of Confederation Life Insurance of Toronto are trying to sell the failed insurer's $130 million head office in Toronto, built shortly before the company collapsed. It hired Toronto-based broker Royal LePage to help find buyers.