Completely Unnecessary



Let me get a few things out of the way first:

1.  The Big 5 Banks are all posting 3rd Quarter Profits for 2017.  Combined - they posted $9.89 Billion in profits for the said period.  FYI, TD posted the largest profit coming in at $2.77 Billion Dollars. 

2.  Mortgage Defaults in Canada are currently at .25% (yeah, that's a decimal in front of the 2...mortgage defaults are only a quarter of 1%!) as of July 31st, 2017...

 Completely Unnecessary - Image 1

But the Government and the Office of the Super Intendent of Financial Institutions are still not in favour of those odds and they are pushing for more regulation to protect the Big 5 from those dodgy borrowers with good credit and lot's of money!

Wait...what?  

...now that that's out of the way, we can begin.

Question:

Should the Government of Canada be able to dictate how Private Companies choose to invest or lend their money when they provide borrowing options that are CHEAPER than the Big Banks?

In my opinion - I think that is where the line in the sand has to be drawn. I do not think that is a prudent measure - rather I find it to be a little over-zealous...and it sure looks like an abuse of Fair Competition!

But, that's exactly what they (The Government...lobbied by the Big Banks) are trying to do. And who is the undeserving beneficiary of this new proposal? 

It's those of you with Exceptional Credit, Strong Net Worth, and Large Cash Reserves for Down Payments - YOU are the ones who are going to be impacted. 

HOW DARE YOU BE SO RISKY?!

Follow Up Question:

Who do you think is more risk to lend money to?


A. 23 year old with 2 years at his/her job with 2 years of credit history (2 credit cards, and a student loan), and 5% down payment gifted from his/her parents - OR -

B. 44 year old with 15 years at their employer with multiple credit lines with no balances - near perfect credit score, with more than 20% down payment from their own savings and investments.

The government and the banks think that "B" is inherently riskier...and so they are trying to put more rigid guidelines in place to reduce the potential risk of borrower default.

???

I struggle to make sense of this. But the truth is, at this very moment. Client A would receive the lowest and most attractive interest rates available and Client B would receive a higher interest rate - even though they are clearly less risk.

What's the take-away?

Banks are not here to help you. They are only here to take your money - on their terms. And they will go to extensive measures to manipulate those terms to their advantage as much as they deem necessary.

And, I am not alone in my thinking...turns out the good folks over at the Fraser Institute also think this new proposed Stress Test is stupid.  

Click the link below for an interesting read:  

Fraser Institute on the Proposed Stress Test