OTTAWA -- Finance Minister Jim Flaherty is coming under fire for using his position to pressure a private sector mortgage lender to raise its interest rates.
"That's banana republic behaviour," said NDP Leader Tom Mulcair, who added the minister has no business interfering with the free marketplace.
Liberal interim Leader Bob Rae called Flaherty's actions "ridiculous" and in essence working to increase borrowing costs for Canadians.
"Either we have a market or we don't," he said. "The banks have huge profits. The idea that they shouldn't be able to give a break to consumers is ridiculous and the idea that the minister of finance would basically be trying to create some kind of a cartel among the banks and the financial institutions as to what they can offer consumers by way of interest rates is I think completely inappropriate, completely wrong actually."
On Tuesday, Flaherty admitted he asked a member of his staff to phone Manulife Financial Corp. (TSX:MFC) after it had cut its posted rate for five-year fixed mortgages to 2.89 per cent from 3.09 per cent.
The company quickly reversed its decision, saying only, "After consulting with the Department of Finance, Manulife Bank has withdrawn the promotional campaign and reverted to our previous posted rate."
It's the second time in a few weeks Flaherty has interfered in the mortgage market.
Earlier in the month, he called the Bank of Montreal (TSX:BMO) after it had dropped its posted five-year rate to 2.99 per cent, but on that occasion BMO did not reverse itself.
Afterwards, he thanked other institutions for not following the BMO lead, at least until Manulife's brief discounted offering.
Since the government tightened mortgage rates in July, Canada's housing market has slowed considerably in terms of sales, starts and even prices. Two weeks ago, the Bank of Canada signalled it was no longer as concerned about Canadian debt levels, saying it does not expect the situation to worsen appreciably from its current high levels.
Flaherty told reporters he acted with Manulife to keep lenders from taking on risky loans and was happy with the company's subsequent decision.
-- The Canadian Press