Canada finance minister sets announcement, housing possible topic

Thu Dec 10, 2015 11:31pm EST
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By Randall Palmer and David Ljunggren

OTTAWA (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 it might cool a heated housing market.

A CTV News report, which did not cite its source, said that the federal government is expected to tighten mortgage rules on Friday in an effort to cool the red-hot housing markets in Toronto and Vancouver.

It said the regulations will increase the minimum down payment required to buy a home for more than C$500,000 ($366,350), with portions beyond that amount requiring a 10 per cent down payment. The down payment on the first C$500,000 will remain at 5 percent.

The regulations are expected to take effect in early 2016, the report said.

A spokesman for Morneau earlier declined to comment on the announcement scheduled for 9:30 a.m. (1430 GMT) on Friday.

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.

Under Finance Minister Jim Flaherty, the former Conservative government stepped in four times from 2008 to 2012 to tighten mortgage lending rules.

Since then, 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.   Continued...

Canada's Finance Minister Bill Morneau takes part in a news conference in Ottawa, Canada, December 7, 2015.  REUTERS/Chris Wattie?