TORONTO, March 19 (Reuters) - Manulife Financial said on Tuesday it is reversing a decision to cut mortgage rates following pressure from Canada’s finance ministry, which has raised concerns about record consumer debt levels.
Manulife, which is Canada’s largest insurer but also offers banking services such as mortgages, said this week it would offer five-year loans at 2.89 percent, down from its previous 3.09 percent and lower than the posted rates of any of Canada’s top five banks.
But the company said on Tuesday it is pulling the low-rate loans.
“After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate,” Manulife spokesman Graeme Harris said in an emailed statement.
Finance Minister Jim Flaherty has tightened mortgage lending rules several times in an effort to cool higher-risk lending and reduce the chances of a U.S.-style housing market crash.
Earlier this month, Flaherty warned the country’s banks not to engage in the kind of risky lending that led to the U.S. housing crisis, after Bank of Montreal cut a popular mortgage rate back to a near-record low.
Canadian housing sales activity has slowed as a result of the last round of mortgage rule changes in July. But prices have remained high as low interest rates have allowed lenders to offer mortgages at historically low levels.