Investors shaken by credit downgrade for Big Banks

The credit ratings firm lowered the score of not only TD, CIBC and Scotia, but smaller players, including National Bank and Desjardins, although RBC would come away unscathed, at least for now.

Moody’s is citing high levels of consumer debt and “high home prices” for the decision to drop each rating by one level, that move coming on the heels of its decision to put all six of the banks under review in the fall. The outlook for each bank, however, remains stable.

"High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks," Moody’s VP David Beattie, said in the report released Monday.

That double whammy has raised concerns those lenders – drivers of mortgage borrowing over the last five years – are now overexposed to any coming correction in home values. Some analysts have, in fact, predicted as much as a 25 per cent drop in values over the next two years.

Moody’s appears to have taken those types of projections to heart, something already giving investors in some markets concerns about their own long-term property values.

Still, an increasing number of investors are in no rush to sell up, pointing to the best landlord’s market in decades and cash flow horizons that might actually get brighter for those looking and able to acquire new, cheaper properties

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