Bank of Nova Scotia T.BNS

can someone break down the situation very step by step?

[robertbig]

need someone to break down the situation very step by step, 

understand the canadian housing market is in trouble, 

get some mortages are becoming interest only, 

why is this bad for the bank?

i thought higher interst rates generally helped banks, wasn't that the problem with european bank earnings?

[mbuch]

When the bank customers can't pay their mortgages the bank doesn't get their interest payments. Sure the bank may own the home but won't get 3 times the value of the interest over the term of the mortgage. The bank will have to sell the house for hopefully what is owed on it. That's not good for the banks.    

[robertbig]

parts of confusion for me 1. i thought in canada the bank has recourse to total amount of mortage loan, which may include but is not limited to taking posession of home,  2. seems like banks are simply extending amortization period, which may not be ideal, i don't know, but doesn't seem terrible, either 3. lots of worry about payments, only covering interest, not principal, but why

[Rakaposhi]

Mortgages in Canada (Except Alberta, Saskatchewan and Quebec... I believe) are full recourse mortgages. Much different than in the US. If you default (assuming you are not CMHC insured), the bank goes after ALL your assets, not just the house to be made whole. Therefore, Canadians will do whatever it takes to pay their mortgage.

[robertbig]

thanks, that's what i thought, surely that limits some of the downside here for banks.... 

[FiddyFiddyShot]

Robert Big - - "Limits some of the downside for banks" ????    Ummmm, BNS dropped to sub 60 from 95 dollars in the span of a year and a half.  That drop doesn't exactly meet the criteria of limiting it's downside...

[robertbig]

i said, limits some of the downside 'from here' meaning, whatever it was trading at, $60? when i posted.... i have no crystal ball, but $90 seems high, my guess is back to $70-80 range within two or three years..... 

[newcoin]

The Canadian housing market is not in trouble. Internet conspiracy nonsense.

[FiddyFiddyShot]

Regardless of interest rates, people are still competing for housing.  And, Prince Justin is bringing ANOTHER 1.5 million people to Canada by 2025, they have to live somewhere....

[Quintessential1]

Read this it may help expalin the situation: https://www.cbc.ca/news/business/mortgage-negative-amortization-1.6986214?fbclid=IwAR2FrleuljenTDX3C_8z1XcFSWn2ogqt3lED9EJ-dAeMkKcTo1kdhQKh8t4 The parts I liked: Some lenders limit the possibility of negative amortizations by either requiring borrowers to come up with lump sum payments when their payment mix nears the limit, or switching them