The federal government is expected today to introduce new rules aimed at toughening up mortgage lending in a bid to curb the record household debt in Canada.

The key change Finance Minister Jim Flaherty is likely to unveil is a cut in the maximum amortization period, to 30 years from 35 years. Mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20-per-cent down payment.

Government sources told the National Post that Flaherty also is expected to lower the maximum amount Canadians can borrow against the value of their homes, to 85 per cent from 90 per cent, and remove federal-government backing of home-equity lines of credit, or so-called HELOCs.

The sources, who spoke on condition of anonymity, add the minimum down payment, at five per cent, will not be changed. Further, the government will not target condominium purchases by requiring monthly condo fees be added to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage.

The changes to the country's mortgage rules -- the second in as many years -- emerge amid rising concern about the record levels of household debt, which, measured as a ratio of money owed to disposable income, nears a startling 150 per cent as of the third quarter of last year.

That surpasses the level of debt held by U.S. households, whose appetite for borrowing helped stoke the financial crisis of a few years ago.

The Bank of Canada recently warned debt levels are growing faster than income, adding the risk posed by consumer indebtedness to the domestic economy would continue to escalate without a "significant change" in how consumers borrow and banks lend.

Bank of Canada governor Mark Carney said policy-makers have a "responsibility" to look at the benefits of preemptive action. Joining the chorus have been chief executives at the big banks, most notably Ed Clark at Toronto-Dominion Bank, in publicly advocating for tougher mortgage standards.

On Friday, Prime Minister Stephen Harper acknowledged his government was considering changes to the rules governing mortgages.

He said the government "remains concerned about growth in the level of household debt and will look at taking prudent steps to moderate that growth. We will look at what steps may or may not be necessary."

In February 2010, Flaherty moved to toughen up the mortgage rules amid worries that Canada was in the middle of a housing-market bubble.

The reforms, since introduced, compelled borrowers to meet standards for a five-year fixed-rate mortgage, even if the buyer wanted a shorter-term, variable-rate loan. The reforms also reduced the amount Canadians can borrow against their home, to 90 per cent of the property value from 95 per cent.

They further required purchasers of rental properties to issue a 20-percent down payment as opposed to five per cent.

The moves played a role, observers say, in slowing down real-estate activity. The new changes reduce even further the amount people can borrow against their homes, to 85 per cent.

Also, the changes target HELOCs, which Flaherty cited as a source of concern in a recent interview.

Home-equity lines of credit surged 170 per cent over the past decade, or twice the rate of mortgage growth, and now represent 12 per cent of overall household debt. With the new rules, Ottawa will no longer back the HELOC, as it was doing up until now through mortgage insurance.

Instead, sources say, the government will signal that the banks are on the hook for any default linked to a HELOC it issued.

The cut in the amortization period, or the time required to pay off the home loan, follows a 2008 move by Ottawa to stop insuring 40-year mortgages.

Although the federal government looks to curb borrowing, economists say the Bank of Canada may have to follow by raising its key interest rate sooner rather than later. The central bank issues its latest rate statement Tuesday and it is expected to hold its benchmark rate at one per cent as signs indicate the economy may be benefiting from renewed business and consumer confidence in the United States.

Stewart Hall, economist at HSBC Securities Canada Inc., said the extraordinarily low-rate environment "provides all the incentive to consumers to borrow and spend and none of the incentive to save. You can try to [regulate] that away but that is apt to be fraught with significant frustration."