On the eve of the federal budget, Finance Minister Jim Flaherty is defending his decision to meddle in Canada’s mortgage market, warning that historically-low interest rates may entice Canadians to borrow more than they can afford.

His comments follow criticism from the opposition-- and even a fellow member of Prime Minister Stephen Harper’s cabinet -- that Flaherty overstepped his bounds after his office asked Manulife Financial to reverse its decision to lower its five-year mortgage rate from 3.09 per cent down to 2.98 per cent. The bank quickly complied.

In a statement, Manulife said it had restored the higher rate "after consulting with the Department of Finance."

While touring a Roots factory in Toronto on Wednesday, Flaherty said rock-bottom interest rates will eventually increase, so that what’s affordable now may not be in the future.

“Our concern, my concern for a number of years, is with very low interest rates that people can afford their mortgages when interest rates go up,” Flaherty told reporters while purchasing a pair of budget-day shoes, a long-running Canadian tradition.

“It’s a concern for Canadians that they’re careful and that they don’t assume that very low interest rates, like we have now, will continue indefinitely, because they won’t,” he said.

But not everyone in the Conservative cabinet agrees with Flaherty’s meddling.

Small Business Minister Maxime Bernier said Wednesday that he wouldn’t dictate to the private sector what prices to offer.

“It’s the market. It’s supply and demand that decides the prices,” he told reporters. “It is the case for interest rates, it is the case for other products too.”

NDP Leader Thomas Mulcair used some of his time during question period in the House of Commons Wednesday to ask which minister speaks for the government on the issue.

"Which minister has the prime minister's confidence, the minister of small business or the minister of finance?” Mulcair asked.

Harper did not respond directly to Mulcair’s query.

"The fact is mortgage rates are lower than they've ever before been in Canadian history under our government," Harper told the Commons."At the same time, we want to ensure that mortgages remain affordable and stable and that the market stays stable and affordable in the long run for Canadian families."

Interim Liberal leader Bob Rae called Flaherty’s actions “ridiculous” and said he was working to increase borrowing costs for Canadians.

On Wednesday, Rae suggested Flaherty’s actions violate the Competition Act, which bars the government from counselling against anything that amounts to a restriction on competition.

"It sounds to me like that's what he's doing," Rae said.

"We either have a competitive mortgage market or we do not. And it's clear to me that Mr. Flaherty would prefer to have a cartel where ... he and his officials are setting the interest rates for every mortgage in this country."

Flaherty has been warning Canadians about carrying too much debt for some time. Earlier this month, he warned lenders to avoid a “race to the bottom” after the Bank of Montreal cut its five-year fixed-rate mortgage to 2.99 per cent from 3.09 per cent.

The Bank of Canada has been warning that high household debt levels, the bulk of which come from mortgages, are the largest risk facing the country’s economy.

Rae said worry for Canadians’ credit worthiness is different than concern over the interest rates they are paying.

"Credit worthiness is a legitimate concern of everyone ... in saying, should we be lending money to Mr. or Mrs. X because either they have too much debt or they don't have enough income (to pay it back)," Rae said.

"But the quid pro quo for that is to say the government should keep its hands off, should keep its mitts away from telling ... any financial institution what price they should be charging for the products that they're offering. That has nothing to do with credit worthiness."

With files from The Canadian Press