A number of prominent analysts have echoed a common sentiment that Banks in Canada are not the same as Banks in the U.S., and therefore are much safer and have a very different investment risk profile overall.
That said, a recent report released by the Bank of Canada highlighting potential systemic risks to the country's financial system has noted that the short-term nature of Canada's mortgage market may indeed prove to be one of the largest headwinds to the broader financial markets and Canadian economy.
Recent hikes in the overnight lending rate passed onto Canada's banks by the country's central bank have led to mortgage and HELOC lending rate increases by all of Canada's biggest banks. The full nature of these rate increases is unlikely to be felt until mortgages renew - a fact which has sheltered many from the blow these rate hikes will have on consumer spending and liquidity.
With Canadians among the most indebted in the world, rising interest rates which will affect as many as 47% of Canadians over the next year, poses a significant risk to Canada's largest banks in terms of lending growth and a potential increase in defaults as Canadians deal with additional constraints to disposable income.
Invest wisely, my friends.
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