Six of Canada’s Bank’s Get Credit Downgrade By Moody’s

Six Canadian banks got a bit of a wake-up call this past Monday. Moody’s downgraded their credit ratings, making investors suitably nervous. Those getting the lower credit scores include Scotia Bank, CIBC, TD and some smaller outfits, Desjardins and National Bank. RBC escaped the downgrade.

Reasons given by Moody include higher home prices and consumer debt being at high levels. The banks were downgraded one level and they were also put under review for fall. But, Moody’s noted, these banks are stable and expected to remain so.

David Beattie with Moody’s noted that Canadian banks are vulnerable because of those inflated home prices and the high amount of debt carried by consumers. Of particular concern is the prediction, by some analysts, that home prices may decrease in value by as much as 25 percent over the next 24 months. Moody’s is taking this prediction seriously, causing concern from investors about property values in the long term.

Yet, many investors are choosing to hang on to their properties, noting that the landlord market is the best seen in a generation. The possibility for positive cash flow opportunities is quite a big carrot to ignore, especially with predictions that the rental market will only improve. Many investors are also looking to expand their portfolios by putting money into newer properties with less expensive price tags.

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