UPDATE 2 - Canada to tighten mortgage rules - CBC

Wed Jun 20, 2012 9:30pm EDT

Related Topics

* Mortgage rules to be tightened for fourth time since 2008

* Flaherty news conference at 8:15 a.m. (1215 GMT

OTTAWA, June 20 (Reuters) - Canada is set to tighten mortgage rules on Thursday as it seeks to cool a heated housing market, cutting the term of mortgages and reducing the amount a home buyer can borrow, the Canadian Broadcasting Corporation said.

The announcement, expected at a news conference by Finance Minister Jim Flaherty, will be the fourth time the government intervened to tighten rules in the mortgage market since 2008.

The Finance Department says Flaherty is scheduled to hold a news conference on Thursday at 8:15 a.m. (1215 GMT). Officials did not immediately reply to requests for confirmation.

In its main Wednesday evening news show, CBC said the government will reduce the maximum amortization period of a mortgage to 25 years from 30 years, and lower the amount of equity against which one can borrow to 80 percent from 85 percent.

Changes to the government housing agency responsible for insuring higher-risk mortgages are also possible, CBC added.

Rising housing prices and extremely low interest rates for mortgages have fueled a Canadian real estate boom that has led some analysts to predict a bubble that could raise the risk of a crash and a broader economic downturn.

Prices have softened in some markets recently, but a strong condominium market in Toronto, the country's largest city, has be en of particular concern to policymakers.

The Bank of Canada said this month that high household debt was the biggest domestic risk to the economy. The debt-to-income ratio is at a record high of 152 percent.

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