Rising rates, high inflation will weigh on banks, other financial firms, Moody's warns — via financialpost Finance Banking inflation
The ratings agency said residential mortgage lenders and non-prime consumer lenders are the “most vulnerable” in an inflationary environment. Commercial real estate lenders, on the other hand, are poised to benefit from their floating-rate portfolios, the report said, but warned that this group could face lower loan demand overall and weaker borrower credit quality.
A rising rate environment has some positives for banks such as increasing net interest margin — the difference between the rate a bank pays on deposits and the rate charged for loans — because deposits pricing changes tends to lag interest rate increases. This means higher profit for the banks. However, the report noted that prolonged inflation and tight labour markets could substantially increase costs and curb loan demand, eroding much of the benefit to net interest margins.
“The rate increase is now pushing up the mortgage stress test’s qualifying rate, removing stretched-out buyers from the market,” Hogue wrote. “But even those who still qualify for a mortgage will see higher rates reduce the size of the mortgage they can get — and the price they can pay.”had already gone up “materially” since last fall when markets began to anticipate the Bank of Canada hikes, muting the impact for borrowers who gravitated towards low variable rates.
Inflation and economic growth are key considerations for banks including those in Canada, the Moody’s report said, adding that the primary concern for financial institutions is that policymakers could create a “hard landing” if they move too quickly or severely to bring inflation under control with rate hikes, slowing economic growth.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Rising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plansRising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plans — via financialpost Finance pensionplan
Read more »
Rising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plansRising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plans BatPost
Read more »
Harley-Davidson’s first-quarter profit drops on rising costs and chip shortagesHarley-Davidson, which has been facing surging costs for raw materials and logistics, said it now expects higher input costs to continue through the rest of the fiscal year
Read more »
Toronto taxi fares could soon rise by $1 per trip in response to rising gas pricesThe cost of taking a taxi in Toronto could soon rise by $1 per trip in response to rising gas prices which have significantly cut into driver profits.
Read more »
U.S. consumer confidence dips slightly in April, but remains high as inflation concerns weighThe Conference Board said Tuesday that its U.S. consumer confidence index edged down to 107.3 in April, from 107.6 in March
Read more »