RE:RE:Middle of recession is now.Donwaan wrote: Greetings Ed...this is from a newsletter writer I subscribe to. Do you or anyone else share these concerns? Canadian banks are going to get into trouble with their large mortgage exposure on housing. I expect Canadian Banks will loose half their value. This will be larger than the 1980 collapse because back then $200,000 was considered a high mortgage, now it is around $800,000. A recent survey by Manulife found that 1 in 4 Canadian home owners feel they will be forced to sell their homes if interest rates keep rising. Those are huge numbers.
Just like in the US, Canadian Banks have to pass regular stress tests, which include relativley modest interest rates.
Comparing a 1980 rate to a 2022 rate, along with mortgage amounts doesn't carry much weight unless the values in comparison are extrapolated.
Banks are required to have enough readily liquid assets as well as cash on hand to handle at least one severe slide.
2019-2020 already taught them a lesson and if push comes to shove, just like in the eighties, the banks along with government approval will be adjusting rates to suit the times.
The last thing anyone involved wants, other than the mortgage holder is to foreclose on a home/business that is worth less than half of what is owed on it.
That's what happened when the Derivative market in the US collapsed. Banking in Canada follows different rules and both the lender and borrower have to pass stress tests before mortgages are approved.