Canada To Buy $50 Billion Mortgages To Keep Credit Market Alive

November 12, 2008 5:45 p.m. EST

Ottawa, Ontario (AHN) - Canadian Finance Minister Jim Flaherty announced Wednesday the federal government is putting in place three measures to ensure the availability of credit to businesses and individuals.

On top of the measures is the purchase by the government of $50 billion more mortgages. Next is a cut on government lending rates to banks and third is the infusion of another $8 billion into the money markets in the next few weeks through a new Canadian dollar term lending facility being established.

The purchase of additional residential mortgages would triple the amount of insured mortgages the federal government has bought from banks by the end of the fiscal year. If the Canadian banks are relieved of residential mortgages, it would free them to lend money to businesses and consumers.

In a news conference, Flaherty said, "It is an efficient, cost-effective and safe way to support lending in Canada at a time of extraordinary strain in global credit markets."

Flaherty added changing fees on bank lending insurance will ensure Canadian banks are not placed at a competitive disadvantage caused by policy changes in other nations. He said government plans to reduce the fees for lending insurance by one-half of a percentage point, which would leave the lowest rate at 1.1 percent of the loan value.