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Canada's Finance Minister Bill Morneau speaks to the economic community during a luncheon in Toronto on Dec. 14, 2015. Mr. Morneau said the federal government remains concerned about the economic risks of high household debt, but has no further plans to cool the housing market.MARK BLINCH/Reuters

Finance Minister Bill Morneau said the federal government remains concerned about the economic risks of high household debt, but has no further plans to cool the housing market after announcing a series of moves to tighten mortgage financing.

"We are very focused on making sure that Canadians are successful, and when we see high levels of indebtedness, that is something that we pay close attention to," Mr. Morneau told a news conference after a speech to the Toronto Region Board of Trade on Monday.

Last week, Mr. Morneau unveiled what he called "targeted" measures to address "pockets of risk" in the housing market, including a plan to increase the minimum down payment for government-insured mortgages on homes worth between $500,000 and $1-million, starting in February.

The changes come as both resale home prices and household debt hit another record high in the third quarter, with debts reaching 163.7 per cent of incomes, up from 162.7 per cent in the previous quarter.

Residential mortgage debt grew by an annualized 5.2 per cent to $1.23-trillion, Statistics Canada reported, while non-mortgage consumer debt increased 2.9 per cent to $572-billion. By contrast, after-tax income rose just 3 per cent.

Soaring home prices in major markets in British Columbia and Ontario have been the main driver of rising household debt levels.

Average resale home prices rose 6.1 per cent compared with last November, according to the Teranet-National Bank house-price index. But nearly all of that growth came from just four markets: Toronto and Vancouver, along with Hamilton and Victoria. Outside of those markets, home prices declined by 0.5 per cent, with prices falling in Calgary, Edmonton, Winnipeg, Ottawa and Halifax.

Canada's household-debt loads have been bumping up against record levels for years now, spurred by years of historically low interest rates and rising residential real estate prices. The Bank of Canada, the federal government and many economists have long been concerned about the trend, as consumers look particularly exposed to risk in the event of an economic shock or significant downturn.

Twice this year, the Bank of Canada has cut its key interest rate to stimulate Canada's sluggish economy, which has kept downward pressure on lending rates and thus encouraged borrowing. But last week, the federal government announced tighter rules on mortgage lending, aimed at cooling the debt risk related to the housing sector.

"The effects of stimulative monetary policy working through the economic system, as well as resilient labour markets year to date, were evident," said Royal Bank of Canada economist Laura Cooper in a research note. But she added that Ottawa's new mortgage rules "have the potential to dampen the pace of accumulation in the mortgage component and resultantly, could alter the dynamics of the evolution of household imbalances going forward."

Mr. Morneau said he planned to wait and see how the new government's changes to mortgage rules will affect the housing market before looking to make any further moves, including any measures to restrict foreign investment in residential real estate or to force lenders to pay a deductible on government-backed mortgage insurance.

"For now, we're focused on dealing with a couple pockets of risk that we see are important," he said. "We think this is an important step and, as we see the market progress, we will stay focused in a way that allows us to consider whether anything is needed in the future."

In his first speech to the private sector ahead of the Liberal's budget consultations, Mr. Morneau repeated Prime Minister Justin Trudeau's mantra of "sunny ways" even as he emphasized the "considerable headwinds" to the Canadian economy, including slowing global growth and plunging oil prices.

He ducked questions around whether the Liberals were abandoning their campaign promise to run $10-billion annual deficits to fund growth, instead reiterating a commitment to reduce the government's debt-to-GDP ratio, grow the economy through infrastructure investments and balance the budget before the next federal election.

As part of its budget consultations, Mr. Morneau said he also planned to unveil an economic advisory council early next year that will include non-Canadian experts "with global experience in growing successful and inclusive economies."

He also acknowledged that Ottawa is anticipating an extended period of low oil prices and that the government's proposed infrastructure spending program would include measures aimed at offsetting the economic pain in the energy sector.

"We should expect that we will be facing a period where our resources are unlikely to be priced back where they were a number of years ago, and we need to prepare for that," he said.

With a report from David Parkinson

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