* No need to toughen mortgage rules at the moment
* Flaherty is monitoring market, will act if needed
OTTAWA, Dec 11 (Reuters) - Canada sees no immediate need to put the brakes on a heated housing market by toughening lending rules, Finance Minister Jim Flaherty said on Friday as fears rose that a housing bubble may be forming.
Flaherty did say, however, that he was monitoring rising debt levels following a Bank of Canada warning on Thursday that household debt poses an increased risk to the economy.
The Bank of Canada cautioned banks to assess carefully households’ overall debt load when approving mortgages as the risk of defaults could rise when the current period of record-low interest rates ends.
“First of all, we don’t intend to do anything right now,” Flaherty said in Quebec City according to a transcript of remark made by reporters.
“We are watching increases in the amount of household debt in Canada. Some of this is to be expected. We have been going through a serious recession, the most difficult economic year globally since the Second World War. So one expects to see some increase in household debt, which we have seen,” he said.
If necessary, Ottawa could take further steps along the lines of its measures recently to eliminate 40-year amortization periods on mortgages and the option of zero down payment, Flaherty said.
Flaherty said he sees continued weakness in the global banking system and is not ready to unwind extraordinary stimulus measures in Canada.
“There are still challenges within Canada, which is all the more reason why we need to stay the course, continue to implement our plan,” he said. (Reporting by Louise Egan; editing by Peter Galloway)