Elevated house prices and record-high debt levels are contributing to worries about Canada's future economic growth, the head of the country's national housing agency says.

Speaking at the Bank of England on Friday, Canada Mortgage & Housing Corp. President Evan Siddall said high house prices in the cities of Vancouver and Toronto have spread to other markets. At the same time, household indebtedness has grown and the concentration of Canadians' net worth in real estate is near historic highs.

"The conditions that we now observe in Canada concern us," Mr. Siddall said, according to the text of his speech, which was posted online by the CMHC. "Increased household borrowing could be jeopardizing our economic future."

CMHC warned last month that it had found "strong evidence" of problematic conditions in the Canadian housing market, with house prices outpacing disposable income in several major cities.

Policy makers in Canada have tightened mortgage rules in recent years in an effort to reduce risky borrowing and cool some of the country's frothiest housing markets. In early October, for example, the government announced the expansion of a "stress test" to ensure new homeowners with mortgage insurance are able to afford higher interest rates.

Mr. Siddall said the expanded stress test and similar policy moves can be more effective than the "blunt" instrument of raising interest rates because they have the ability to target specific pockets of vulnerability.

"This interest rate buffer will specifically help offset the highly stimulative effect of low interest rates," Mr. Siddall said, referring to the government's recent stress test rules.

CMHC is Canada's government-backed mortgage insurer and controls about half of the market. Home buyers are required to take out mortgage insurance if they are making a down payment of less than 20% of the total price of a home.

Write to Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

November 18, 2016 11:15 ET (16:15 GMT)

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