The BNN Bloomberg Andrew Bell presented an analysis and perspective on the global economy and banking troubles this morning.
TORONTO — In an interview with cp24, Bell said, "International Monetary Fund warned one factor could slow growth this year". "It was only two banks in America that went bust. We have seen evidence that billions of dollars have been transferred from smaller banks to larger lenders in the US, although their depositors got bailed out by taxpayers. The average person does not want to have their deposits called up in the event of a bank failure. Life is too short to mess with that kind of thing," he added.
As a result, this may spill over into other countries as well. Those who have smaller deposits might start moving their money out. Thus, smaller deposit takers and smaller banks will have to pull back on their loans, making borrowing harder and more expensive. According to the International Monetary Fund, global growth this year will be about 2.8%, a slowdown from 3.4% last year. Inflation and higher interest rates have caused enough problems, and their full effects have yet to be seen. All of us believe that banks are losing their ability to lend money, Bell concluded.
What's going in terms of home prices? What's the latest in the real estate market?
According to Bell, the house prices in Toronto have stopped declining. Although they are still sharply declining from more than a year ago, they have been increasing month over month lately. According to our partners at Bloomberg, Canadian banks are giving people a break for their variable rate mortgages without making a big fuss.
Occasionally, they are allowed to reduce their payments or, at the very least, they are allowed to start paying interest instead of bringing down the principle when their payments should have gone up. This is a complex issue. Banks, however, are keen to avoid people defaulting on their loans and having to sell their houses. Because that would lead to a downward spiral in house prices.
Therefore, if you have a variable mortgage, talk to your bank early, because their interest is in keeping you as a customer. Certainly, they are not interested in taking over your home. It's probably the last thing they want to do. They are just not geared up for that. The only thing they want is to lend money. Banks charge fees for that, and that's what they do.
In markets like Britain and Canada where a lot of people have variable rate mortgages, lenders, particularly Canadian banks, are quietly extending this help to borrowers.
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