3 Min Read
(Recasts, adds possible steps to cool housing market)
By Randall Palmer and David Ljunggren
OTTAWA, Dec 10 (Reuters) - Canadian Finance Minister Bill Morneau has scheduled an announcement for Friday morning, and while no topic was given, the government is facing a key decision on how to cool a heated housing market.
Canadian household debt as a percentage of income is at an all-time high, in large part because of big mortgages taken on as housing prices rise, particularly in the major cities of Vancouver and Toronto.
Canada avoided the housing crash of 2007 that hit the United States and triggered the global financial crisis. But a post-recession housing boom, fueled by record-low borrowing costs, has prompted some analysts to warn a bubble may be in the works.
Finance Department officials have for two or three years been recommending some form of action to try to prevent financial trouble, one industry source said.
The Conservatives, who lost power to the Liberals in the Oct. 19 election, had been contemplating action if they won, the source said.
A second well-placed source said a lead option being considered was to increase the percentage down payment required for insured mortgages over a certain dollar amount, beyond the current 5 percent.
Such a tiered system, with a greater percentage required the larger the mortgage, has the advantage of trying to target the hotter markets without shaking areas where prices are much lower.
The drawback is that it could add to the woes of markets in cities like Calgary, which still have expensive housing because of past resource booms but are now suffering because of slumping oil and commodity prices.
Under Finance Minister Jim Flaherty, the former Conservative government stepped in four times from 2008 to 2012 to tighten mortgage lending rules. His successor, Joe Oliver, displayed less concern.
A spokesman for Morneau declined to comment. His announcement will be at 9:30 a.m. (1430 GMT) on Friday. (Reporting by Randall Palmer and David Ljunggren; Editing by David Gregorio and Peter Cooney)