09-04-2015, 10:10 PM
To elaborate on rayray's point...the Canadian banks are different from the US banks. The main focus for the institutions is long term stability and steady growth. Like rayray pointed out, the banks have existed and paid dividends since the 1800s.
Yes, there are problems such as housing bubble, recession, commodity market collapse that provide headwinds in Canada. But people seem to equate this to the US housing bubble and the collapse of the financial system. The Canadian picture is different in certain key areas:
- Most mortgages are insured and backed by taxpayer via CMHC (Canadian Mortgage Housing Company). The Federal government has repeatedly stepped in the last few years (last intervention was 2-3 years ago) - so that folks cannot buy houses with less than 5% downpayment. Also, anyone with less than 20% downpayment is required to buy mortgage insurance. One contrary point here is that over the last few months, the number uninsured home owners have increased - having found some loopholes.
- The more important point to consider is that the laws here in Canada are different. Like the US, we cannot walk away from the mortgage if the housing prices crash. We are liable and these are "full recourse" loans. More details here
All to say, the Canadian banks are fine and arent going to collapse as some ppl fear. And with extremely attractive valuations, they provide great opportunity here.
Yes, there are problems such as housing bubble, recession, commodity market collapse that provide headwinds in Canada. But people seem to equate this to the US housing bubble and the collapse of the financial system. The Canadian picture is different in certain key areas:
- Most mortgages are insured and backed by taxpayer via CMHC (Canadian Mortgage Housing Company). The Federal government has repeatedly stepped in the last few years (last intervention was 2-3 years ago) - so that folks cannot buy houses with less than 5% downpayment. Also, anyone with less than 20% downpayment is required to buy mortgage insurance. One contrary point here is that over the last few months, the number uninsured home owners have increased - having found some loopholes.
- The more important point to consider is that the laws here in Canada are different. Like the US, we cannot walk away from the mortgage if the housing prices crash. We are liable and these are "full recourse" loans. More details here
All to say, the Canadian banks are fine and arent going to collapse as some ppl fear. And with extremely attractive valuations, they provide great opportunity here.