* Home prices rise 1.1 pct in February from January
* Up 5.1 pct from February 2011
* Smallest yr-o-yr increase since June
* Prices rise in all 5 metropolitan markets
By Jon Cook
TORONTO, March 23 (Reuters) - Canadian housing prices rose for a second straight month in February, but the size of the increase continued to shrink from year-earlier levels, the Canadian Real Estate Association said on Friday.
The recently launched MLS Home Price Index, which monitors housing prices in five major urban markets, rose 1.1 percent in February from January, and was up 5.1 percent from February 2011, the smallest year-over-year increase since last June. In January, prices were up 5.2 percent year-over-year.
The report did not provide any actual prices.
"MLS HPI trends for February show that home price growth is generally slowing," Gary Morse, the industry group's president, said in a statement.
February gains were strongest in Toronto, where a shortage of single-family homes pushed prices up 1.4 percent, outpacing January's modest 0.3 percent bump. Toronto prices climbed 7.3 percent from February 2011.
Prices rose in all five of the metropolitan centers covered by the index. Calgary was up 1.1 percent, Vancouver was 0.95 percent higher, and Fraser Valley, British Columbia, gained 0.7 percent. Montreal had the smallest increase, up 0.6 percent.
"The index typically rises in February from the previous month as demand ramps up leading into the spring housing market," Gregory Klump, the industry group's chief economist, said in a statement.
Earlier this month, Statistics Canada data showed new home prices edged up 0.1 percent in January from December, the 10th consecutive monthly increase.
Canadian policymakers and economists have fretted about rising housing prices as household debt levels have soared. The ratio of debt to personal disposable income hit a record 151.9 percent last year.
Toronto-Dominion Bank has forecast that by late next year the ratio will reach the 160 percent peak seen in the United States and Britain before their housing crises took hold.
On Thursday, Finance Minister Jim Flaherty signaled he was reluctant to tighten mortgage rules as a means of cooling prices. Since 2008, Flaherty has taken several steps to try to slow the market, including lowering the maximum amortization period for new mortgages to 30 years from 40 years.
A majority of forecasters surveyed by Reuters in February expected him to tighten mortgage rules again this year.
A limiting factor in the market may be a reduction in the amount of government-backed mortgage insurance available from Canada Mortgage and Housing Corp.
The federal housing agency forecast this week that its mortgage loan insurance commitments will be C$557 billion ($557.98 billion) by the end of 2012, close to the C$600-billion limit imposed by the federal government.
With little room left under the cap, CMHC said it expects to increase its mortgage insurance amount by an additional C$30.5 billion over the next four years, far less than the C$170 billion in guarantees it made between 2007 to 2011.
Mortgage insurance from the agency helps support buyers who can't afford to make a 20 percent down payment on the purchase of a home.