{"id":1553089,"date":"2022-07-13T17:35:52","date_gmt":"2022-07-13T21:35:52","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1553089"},"modified":"2022-07-13T17:36:09","modified_gmt":"2022-07-13T21:36:09","slug":"bank-of-canadas-jumbo-rate-hike-set-to-slow-lenders-earnings-growth","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/bank-of-canadas-jumbo-rate-hike-set-to-slow-lenders-earnings-growth\/","title":{"rendered":"Bank of Canada\u2019s jumbo rate hike set to slow lenders\u2019 earnings growth"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">24<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fbank-of-canadas-jumbo-rate-hike-set-to-slow-lenders-earnings-growth%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1553089&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p> (Corrects second byline)<\/p>\n<p>By Saeed Azhar and Sin\u00e9ad Carew<\/p>\n<p>NEW YORK (Reuters) -Bank of Canada\u2019s surprise full percentage point interest rate hike on Wednesday could put the brakes on the country\u2019s once-frothy housing market and weigh on banks\u2019 profits after strong mortgage growth emerged as the main growth engine during the pandemic.<\/p>\n<p>The Canadian housing market was on fire earlier this year, fueled by ultra-low borrowing costs and pandemic-related demand shifts, with prices surging more than 50% over two years. <\/p>\n<p>But sales have dropped dramatically in recent months and May\u2019s average selling price was down 12.9% from February\u2019s peak.<\/p>\n<p>\u201cHigher mortgage rates are definitely going to be headwinds for real estate and for the banks,\u201d said Paul Gardner, portfolio manager and partner at Avenue Investment Management.<\/p>\n<p>Mortgages accounted for about 50% of Canadian banks\u2019 loans book, analysts estimate.<\/p>\n<p>But Gardner said unemployment is low in Canada, which means people can still pay their mortgages even though there\u2019s going to be less discretionary spending for them.<\/p>\n<p>\u201cYou\u2019re most vulnerable when unemployment goes through 10% and we\u2019re facing the other side, so it\u2019s kind of things that there are extreme events that are neutralizing each other,\u201d Gardner said.<\/p>\n<p>He said bond markets are already pricing in a recession with an inverted yield curve, which is generally not great for the banks.<\/p>\n<p>The Canadian central bank raised its policy rate to 2.5% from 1.5%, its biggest rate increase in 24 years, and said more hikes would be needed. Economists and money markets had been expecting a 75-basis point increase.<\/p>\n<p>The gap between the 2- and 10-year Canadian bond yields widened by 11 basis points to about 15 basis points in favor of the shorter-dated bond.<\/p>\n<p>Shares of the Royal Bank of Canada fell as much as 2.3% to a session low of C$124.71 ($96.29) on the Toronto Stock Exchange after the rate decision. Toronto-Dominion Bank shares dropped as much as 2.8% to C$78.55 but were last trading down 1.7% at C$79.50, while Bank of Nova Scotia shares dropped as much as 2.1% to C$73.40, but last traded down 1.2%. <\/p>\n<p>The benchmark Canadian stock index fell to its lowest since March 2021 after the rate decision, but recovered to trade flat by late afternoon.<\/p>\n<p>Sohrab Movahedi, banking analyst at BMO Capital markets, said the housing market has held up and part of this is how the product works: banks pre-approve or provide a commitment to consumers on housing loans. \u00a0<\/p>\n<p>They have an assumption of what would translate into real loans and banks hedge themselves, he said.<\/p>\n<p>\u201cIn all likelihood with the rates moving higher, the proportion of those commitments that ends up in a loan will be lower than usual. More people will choose to either buy smaller houses or defer the purchase,\u201d Movahedi said.<\/p>\n<p>\u201cIf the economy is going to slow down from here, then earnings growth prospects for the banks will also slow.\u201d<\/p>\n<p> (Reporting by Saeed Azhar and Sinead Carew; additional reporting by Julie Gordon and Fergal Smith in Ottawa; editing by Jonathan Oatis)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/?attachment_id=2725902\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/07\/tagreuters.com2022binary_LYNXMPEI6C0Z5-VIEWIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI6C0Z5-VIEWIMAGE\" \/><\/a><\/p>\n<p><a href=\"https:\/\/www.oann.com\/?attachment_id=2725905\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/07\/tagreuters.com2022binary_LYNXMPEI6C0Z3-VIEWIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI6C0Z3-VIEWIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(Corrects second byline) By Saeed Azhar and Sin\u00e9ad Carew NEW YORK (Reuters) -Bank of Canada\u2019s surprise full percentage point interest rate hike on Wednesday could put the brakes on<\/p>\n","protected":false},"author":66,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1553089","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1553089","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1553089"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1553089\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1553089"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1553089"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1553089"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}