New mortgage rules may dampen economic growth: Flaherty

OTTAWA — Finance Minister Jim Flaherty says he realizes tightening mortgage rules could slow economic growth and cool the housing market, but that he’s prepared to take the risk.

Flaherty says he took action last week because there was no sign of a let-up in the hot condo market in major cities and because many Canadians can’t seem to resist the lure of low mortgage rates.

TD Bank has estimated that Ottawa’s move to reduce the maximum amortization period to 25 years from 30, effective next month, will curtail economic growth by about 0.2 percentage points in 2013.

Flaherty told reporters in a conference call from Ireland that he realizes the action may dampen the economy.

But he says the risk of a housing bubble if had he not acted would have been greater.

In fact, he says it would be a good thing if Canada’s housing market cools somewhat.