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Flaherty says mortgage rules worth the risks
OTTAWA -- New mortgage rules to discourage homebuyers from borrowing too much could further dampen a fragile economy, but it's a risk worth taking, Finance Minister Jim Flaherty said Friday.
Concerned about the continuing heat in the housing market, last week Flaherty intervened on mortgages for the fourth time in less than four years, cutting the maximum amortization period for government insured mortgages to 25 years from 30.
The move is meant to discourage marginal buyers by raising monthly mortgage costs.
But a TD Bank analysis this week calculated the measure would also likely have the effect of dampening economic growth by 0.2 percentage points in 2013.
In a conference call from Galway, Ireland, where he was wrapping up a one-week visit, Flaherty said he had not read the TD report, but doesn't disagree the economy could be affected.
"We are prepared to take that risk, quite frankly, because of the greater risk of the development over time of a housing bubble."
Flaherty, as well as Bank of Canada governor Mark Carney, have been fretting about the continuing strength of the housing market for several years, particularly since the market has been fuelled by borrowing, rather than rising incomes.
The two policy-makers have long expressed concern that credit continues to grow, although at a slower pace, with household debt-to-income hitting a record high of 152 per cent in the fourth quarter of 2011.
-- The Canadian Press
Republished from the Winnipeg Free Press print edition July 1, 2012 B11
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