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UPDATE 2-Bank of Canada repeats rate message, sees debt slowing

* Carney says household debt growth may be slowing

* Sees some cooling in housing market

* Repeats that rate hikes will likely be needed over time

OTTAWA, Oct 30 (Reuters) - There are signs that Canada's soaring household debt and its heated housing market - two of the biggest headaches for the country's policymakers - are decelerating, Bank of Canada Governor Mark Carney said on Tuesday

Speaking to legislators, Carney also maintained his stance as the most hawkish central banker in the Group of Seven rich countries, saying the bank is more inclined to raise interest rates than to lower them, although not any time soon.

He said there have been ``mixed signals'' on the issue of record high household debt in Canada since several moves were made by the federal government and its agencies.

Among them, the government tightened mortgage rules, the financial regulator introduced new mortgage lending standards, and the central bank has hinted since April at higher interest rates to come.

``And I say that in a positive sense ... there are some signs that accumulation of household debt is slowing,'' Carney said in response to a question from a member of the House of Commons Standing Committee on Finance.

``So the pace is slowing, it's still accumulating, and that some adjustment appears to be under way in the housing market. This requires continued vigilance by all parties and we intend to play our part in that,'' he said.

Canadian housing prices fell during the global recession, but the market bounced back stronger than before as the economy recovered faster than those of some other major countries.

Low interest rates spurred heavy borrowing as home prices rose, pushing the household debt-to-income ratio to levels seen in the United States before its housing market crash.

Carney said it was too early to say if signs of improvement would last and has not ruled out further action, possibly by the Bank of Canada itself. The government's tighter mortgage rules are just starting to be felt in the housing market and more observation is needed before deciding, he said.

'HAWKISH LIGHT'

Indeed, the central bank has begun to lay the groundwork in recent statements for the potential use of rate hikes to address the housing and debt problems, something its inflation-targeting mandate allows it to do under extreme circumstances.

``Any adjustment to monetary policy would take into account the evolution of domestic and global factors, including the imbalances in the household sector,'' he said.

In his prepared remarks to the committee, Carney repeated the guidance used in the Oct. 23 interest rate announcement.

``Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 percent inflation target.''

The bank had been hinting at tighter monetary policy for months but last week softened its tone somewhat and Carney later told reporters rate hikes were ``less imminent''.

One pundit dubbed the shift as one from ``hawkish light'' to ``hawkish extra-light.''

The unusually blunt guidance came after a series of messages from the bank that some market players saw as confusing and contradictory.

The bank is expected to begin raising rates in the fourth quarter of 2013, according to the median forecast of Canada's primary securities dealers surveyed last week.