Canadian consumers are facing mounting financial pressure amid higher interest rates, and it’s something Canada’s biggest lenders are bracing for. But there are steps that borrowers — and the banks themselves — can take to soften the blow.
The latest bank earnings showed risks of a slowing economy are weighing on the country’s largest financial institutions, many of which reported dips in profit and higher provisions for possible loan losses in their third quarters.
Some of these banks say they’re “comfortable” with risk levels on their mortgage books even as “pressure” mounts on consumers in a rising interest rate environment.
Royal Bank of Canada CEO Dave McKay told analysts last week after announcing job cuts at the bank that the impact of higher interest rates and external factors like a slowdown in China will serve to cool Canada’s economy.
“We are seeing evidence of slowing labour markets as evidenced by slowing wage growth, lower job postings and an increase in Canadian unemployment. Consequently, our base case forecasts a softer economic outlook,” he said during the bank’s third-quarter earnings call.
Scotiabank CEO Scott Thomson told analysts that the bank was putting aside more funds for loans that could go sour — a move mirrored by the other Big Six banks this week — amid signs of “recessionary conditions” in the economy.
While many economists have been forecasting a slowdown in the economy this fall as Canadians face higher debt costs and gird themselves against possible job losses or hits to income, consumer spending has been surprisingly strong for much of 2023.
TD Bank’s latest consumer spending tracker released Wednesday shows that while spending on discretionary goods is indeed falling off, still-strong
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