(Updates with tightening of mortgage lending rules)
OTTAWA, May 20 (Reuters) - Canada said on Thursday it would tighten rules on mortgage lending starting next month after the Bank of Canada earlier warned that the hot housing market and high household debt levels had left the economy more vulnerable to economic shocks.
The country’s financial regulator and the Finance Department said separately that borrowers of both uninsured and insured mortgages must show that they can afford loans that are the higher of their current rate plus 200 basis points, or 5.25%.
That is a tweak to a mortgage stress test here Canada introduced in 2017 to ensure that borrowers are able to make payments even when interest rates increase.