No One Using The “R” Word In Canada
While the banks , government and industry are not yet ready to use the “R” word there are some very uneasy people in the board rooms and in the decision making rooms of government.
Alberta has to face the fact that they are going to have a major deficit because of the drop in oil revenues. The governments of Alberta, Saskatchewan and the federal government are in lock step trying to stave off the fact that along with the reduction of government revenue, a large number of folks in the work force suddenly find themselves without a job and that adds to the problem.
It is hard to imagine that we will, even if the economy tightens up, see the housing market go into the tank. There is not likely to be a rush to foreclose on homes as there was in the early 80’s when mortgage rates were in the double digits . The spread between mortgage rates and what the banks are paying out in interest rates are so small, in many cases less than 2 points, that they don’t have the appetite even if the country was in recession to move to foreclose.
The banks long ago spotted the area to make money, big money and they have been exploiting it ever since . The credit card debt in Canada is enormous. It is to a point where governments have been concerned with our debt load in Canada. The difference however is the banks can enjoy a spread of between 15% and 18% on their money , problem is of course, much of it is unsecured.
So do we see a downturn in the economy in the next few months, certainly not if the banks, and of course the federal government heading into an election will have its say. There may be a new reluctance to issue credit cards, but the home market looks safe
I’m Meisner and that’s one man’s opinion.