With the big Canadian banks set to reveal their quarterly earnings, investors are eager to take a close look to see how higher interest rates and a questionable trade environment are hurting the economy’s prospects.
The five big banks regulate the Canadian economy, taking primary control of loans and investments for both consumers and businesses. Not to mention that they are intrinsically linked to the housing market, and since the Bank of Canada has hiked its rate four times since last year, the banks have also continued the same trend to their customers.
In theory, with more rate hikes expected, banks are able to get more bang for their buck, charging customers higher interest rates for loaning them money. Hiking the interest rates is great for the banks’ bottom lines. RBC recently reported Q3 earnings of just over $3.1 Billion! That's $313 million or an 11% increase from last year! However, that’s only true if these tighter lending conditions don’t make it harder for them to get new business.
The big banks dominate the Canadian mortgage market, providing nearly two-thirds of all mortgages. But the tides are changing. New tighter mortgage standards are likely to slow new mortgage business between five and twelve percent, according to Bloomberg banking analyst Paul Gulberg says. Because of this, the banks are starting to concede ground to alternative lenders.
"Banks will likely maintain their credit-quality standards and let mortgage loans decline," he said. Sticking to safe borrowers will cut down on losses, but will stunt any potential for growth.
Combining this with the uncertainty of the trade market and the potential end of NAFTA would create a major shock to the economy and put us in uncharted territory.
Regardless of what the banks’ statements reveal, Millennial’s Choice can help you find the best options available for a mortgage. While banks are focused on meeting their status quo, we are interested in getting the deal that is best for your situation. For more information, please contact us at firstname.lastname@example.org