OTTAWA (Reuters) - Canada may require people taking out mortgages to come up with a larger downpayment if it looks like indebtedness is getting too high, Finance Minister Jim Flaherty said in a interview released late on Sunday.
Flaherty’s remarks echoed concerns voiced last week by Bank of Canada Governor Mark Carney about households’ ability to pay down debt. Household debt relative to income has risen sharply though it is below U.S. and British levels, and Carney warned consumers not to assume that interest rates will stay low.
“If we see further evidence that there is excessive demand in the housing market or that there’s an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action,” CTV television quoted Flaherty as saying.
“The likely action we will take is to increase the size of the downpayment from 5 per cent to a higher number, reduce the amortization -- bring it down from 35 years to something less.”
Shortening the amortization period would mean mortgage payments would have to go up to pay the loan off more quickly, and might make people think twice about taking on more debt.
The interview with Flaherty is expected to air on the program Question Period on Sunday.
Reporting by Randall Palmer; editing by Rob Wilson