The Globe and Mail reports in its Friday edition that the Bank of Canada believes that higher interest rates and stricter mortgage rules are successfully curbing lofty Canadian home prices and high household debt levels, but warns that the vast size of outstanding debt continues to pose a key risk to the financial system. The Globe's David Berman writes that Governor Stephen Poloz says, "The two main vulnerabilities we have been watching closely are showing continued signs of easing, which is encouraging." The upbeat assessment comes from the BOC's semi-annual Financial System Review, released on Thursday, and follows substantial changes to the country's mortgage regulatory framework and economic conditions in Canada. Regulators, keen to slow the pace of house-price growth in a number of key Canadian markets, especially Toronto and Vancouver, recently tightened mortgage regulations and imposed stress tests to make it more difficult for prospective home buyers to qualify for loans. At the same time, interest rates and bond yields have been rising with global economic activity, lifting borrowing costs significantly. Five-year fixed mortgage rates have increased by about 110 basis points over the past year.