Manulife pulls low-rate mortgage after Canada government pressure

Tue Mar 19, 2013 4:11pm EDT
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By Cameron French

TORONTO (Reuters) - Manulife Financial (MFC.TO: Quote) said on Tuesday it is reversing a decision to cut Canadian mortgage rates following pressure from Finance Minister Jim Flaherty, who has raised concerns about record high consumer debt levels.

Manulife, which is Canada's largest insurer but also offers banking services such as mortgages, said this week it would offer five-year loans at 2.89 percent, down from its previous 3.09 percent and lower than the posted rates of any of Canada's top five banks.

But the company said on Tuesday it is pulling the low-rate loans.

"After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate," Manulife spokesman Graeme Harris said in an emailed statement.

Canada's Conservative government has tightened mortgage lending rules several times in an effort to cool higher-risk lending and reduce the chances of a U.S.-style housing market crash.

Earlier this month, Flaherty warned the country's banks not to engage in the kind of risky lending that led to the U.S. housing crisis, after Bank of Montreal cut a popular mortgage rate to a near-record low.

"The minister felt that it was intolerable that Manulife would make this change and he instructed one of his staff to call up and pass along the message that it would not be tolerated," said a spokesman in Flaherty's office.

Canadian housing sales have slowed following the last round of mortgage rule changes in July.   Continued...