TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty said on Wednesday he was concerned that Canadians might not be able to afford their mortgages when interest rates rise, speaking after he gave Manulife Financial (MFC.TO) a tongue-lashing for offering ultra-low rates.
“Our concern, my concern for a number of years with very low interest rates, is to ensure that people can afford their mortgages when interest rates go up,” Flaherty told reporters.
“It’s a concern for the Canadian people, that they’re careful and that they don’t assume that very low interest rates like we have now will continue indefinitely, because they won‘t,” he said.
Flaherty made the remarks when asked if the federal budget would address mortgage lending rates.
Record-high household debt in Canada, fueled by a prolonged period of rock-bottom borrowing costs, has prompted Flaherty to tighten mortgage rules four times since 2008 to cool higher-risk lending and reduce the chances of a U.S.-style housing crash.
In a sign he remains uneasy about borrowing trends, he instructed one of his staff to call Manulife late Monday to inform the country’s largest insurer that their offer of five-year loans at 2.89 percent was intolerable.
Manulife subsequently withdrew its campaign and reverted to its previously posted rate of 3.09 percent.
Flaherty said that earlier this month personally called an executive at Bank of Montreal to complain after the bank cut a popular mortgage rate to a near-record low.
In other remarks on Wednesday, Flaherty gave the strongest hint yet that there would be more help for manufacturers in the budget on Thursday.
“We’re going to talk about manufacturing in the budget tomorrow, and some specific measures that we’re going to take particularly to help manufacturing enterprises in Canada, including in Ontario, a very important place for manufacturing in Canada,” he said.
Manufacturers have not fully recovered from the 2008-09 recession and are struggling with a strong currency and weaker demand for Canada’s exports from the United States.
In the spirit of helping factories - and in keeping with the tradition of finance ministers buying new shoes before budget day - Flaherty held his news conference at a leather factory run by Canadian company Roots and bought a pair of black Oxford shoes for C$158 ($153).
Writing by Louise Egan; editing by Chizu Nomiyama, G Crosse