UPDATE 1-Manulife pulls low-rate mortgage after Canada gov't pressure

Tue Mar 19, 2013 4:06pm EDT
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* Manulife had offered 5-year loan at 2.89 pct

* Finance minister has warned banks to curb risky lending

* High debt levels have raised worries of housing crash

By Cameron French

TORONTO, March 19 (Reuters) - Manulife Financial 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"After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate," Manulife spokesman Graeme Harris said in an emailed statement.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.   Continued...