Fed buys up $25 million in Mortgages

THE CANADIAN PRESS

OTTAWA–Finance Minister Jim Flaherty has announced government measures aimed at stabilizing the country's troubled lending industry – measures he predicts will prod banks to further lower their lending rates.

Flaherty says the Canada Mortgage and Housing Corp. will take steps to maintain the availability of longer-term credit by purchasing up to $25 billion in insured mortgage pools.

He says the move will ease some of the pressure on banks and other lending institutions caught in the global credit crunch, thus making loans and mortgages more available and affordable to Canadians.

Flaherty says the program is an "efficient, cost-effective and safe way to support lending in Canada that comes at no fiscal cost to taxpayers."

The finance minister says Canada's banks and financial institutions remain "sound and well-capitalized, and less-leveraged than their international peers."

He says the mortgage system is also sound – Canadians have smaller mortgages relative to the value or their homes and household incomes than Americans.

But he says it's becoming increasingly clear that what he described as the severe, protracted and growing disruption of global credit markets has made it more difficult for Canadian financial institutions to raise long-term funding.

And he says that's beginning to affect the cost of mortgages and other loans in Canada.