OTTAWA (Reuters) - Nearly one in six Canadians would be overburdened by a C$500 ($382.03) increase in their monthly mortgage payments should interest rates rise, a survey showed on Tuesday, highlighting concerns about whether homeowners have taken on too much debt.

A survey released by Bank of Montreal's Wealth Institute BMO.TO found 16 percent of Canadians said they would not be able to afford such an increase in their mortgage under a higher interest rate scenario.

Twenty-seven percent said they would need to review their budgets to afford the higher payments, while 26 percent said they would feel concerned but could probably handle it.

Just 9 percent of those polled said they could easily handle the higher cost.

While interest rate increases are seen as being a long way off for Canada, economists have warned that the central bank will need to be careful not to raise too fast so that consumers can adjust. [CA/POLL]

Canada’s housing market has been a source of strength for the economy in the years since the global financial crisis, but rising prices and record-high debt levels have raised fears the market is over-valued and could be due for a correction or crash.

The Bank of Canada has cut interest rates twice this year to offset the impact of cheaper oil on the economy, acknowledging as it did so the risks from “household imbalances.”

In the midst of low oil prices, the bank said earlier this year that the most important domestic financial system risk is that jobs and income decline enough to reduce Canadians’ ability to pay their debt, leading to a housing correction.

So far, despite layoffs in the energy sector, the broad labor market has been resilient.

Nearly half of those surveyed felt that the debt level of Canadians has been influenced by higher real estate values, while 40 percent thought it was due to low interest rates.

($1 = 1.3088 Canadian dollars)