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Email this3:07 pm
May 28, 2013
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The Bank of Canada today raised key interest rates by 25 basis points from 0.50% to 0.75%, the first increase in about seven years. The big five Canadian Banks quickly followed suit, raising prime rates by 0.25%. Not much word though about savings account interest rates also going up!
In this way the banking industry appears to operate much like the oil and gas companies. When oil goes up, those companies quickly raise the gas price at the pumps. But if oil drops, the price at the pump takes weeks if not months to drop, with the companies saying that more expensive oil already in the refinery system needs to be processed first. Odd then how the same argument does not apply when prices go up - should they not hold gas pump prices steady until the cheaper oil is out of the system? Of course not - all of these companies operate on the same premise - be very quick to make changes which increase their profit, and very slow to make any changes which might reduce it.
How long will it be before the financial institutions announce increases to savings rates? And will they apply the entire 0.25% increase?
3:41 pm
October 21, 2013
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Considering that most depositors' interest rates continued to gradually fall ever since the last BoC rate drop in about Jan 2016, I wouldn't hold my breath on savings and GIC rates increasing quickly. Apparently that requires much "sober second thought".
7:21 pm
January 9, 2011
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In a potentially rising rate short term future, nobody will renew 1 year GICs, thereby swelling the savings pool temporarily. Unless some bank wants to re-enter being competitive with their savings rates, my guess is 1 year GIC rates will be the first to rise. But then who knows. In a normal market, savings and short GICs would be up .25% within a week.
Hopefully this thread can be used for info about changes to both types of investments.
"Keep your stick on the ice. Remember, I'm pulling for you. We're all in this together." - Red Green
9:13 pm
October 21, 2013
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Thanks for the info about normal market patterns. Did not know that.
Does the same rule of thumb apply to changes in mortgage rates? There is so much negativity out there about increasing mortgage rates even a smidgeon, that I wonder if that might slow things down for depositors' rates.
I'm holding some matured one-year funds, waiting for that rate to improve at Hubert. They reduced it only a few months ago. I can wait, as life is better in some savings accounts!
4:18 am
January 9, 2011
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Loonie said
Thanks for the info about normal market patterns. Did not know that.Does the same rule of thumb apply to changes in mortgage rates? There is so much negativity out there about increasing mortgage rates even a smidgeon, that I wonder if that might slow things down for depositors' rates.
I'm holding some matured one-year funds, waiting for that rate to improve at Hubert. They reduced it only a few months ago. I can wait, as life is better in some savings accounts!
Its confusing in the ultra low rate market we have been in. Usually Prime lending rate and short term savings rates move hand in hand, while mortgage rates and bond rates (and to a lesser extent GIC rates) move hand in hand. Its thought some of these 2nd tier savings and GIC account banks we deal with for higher rates are using savings accounts to help fund long term mortgages. If so you can imagine based on the spreads how a train wreck could be ahead. 
"Keep your stick on the ice. Remember, I'm pulling for you. We're all in this together." - Red Green
5:00 am
October 21, 2013
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Hmm. Perhaps there has been a shortage of longer term deposits to match mortgages, as many people are hesitant to commit to five years of a low rate.
One would hope that, with all the regulation that is in place and so on, that it would be difficult for a FI to take such a risk.
10:05 am
September 11, 2013
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I'm sure others know a lot more about this than me but from a macro view interest rates since 9/11 have been at historic lows (like pretty much in USA history since the Revolution), all governments printing money in one way or another ("quantitative easing", etc) to keep the ship afloat, trillions upon trillions of government (at all levels) debt in the West and elsewhere too. I might be wrong but in my view this debt elephant in the room (along with the general population's lack of concern about it, almost complete comfort with ever-increasing debt) is what is the different factor in the last 15 years, (here's my point) is why you'll be looking in vain for the "normal" business-cycle interest rate patterns and cycles of days of yore - it's not coming back, IMHO (am I using that right?), because public debts combined with government intervention in economies far outweigh the capacity of the global private sector to generate the wealth needed to shape our economic future. I have read about Germany in the years leading up to WWII, and in the end it didn't really matter what financial measures were taken (and lots was tried), the essential fact that it could never hope to repay its public debts, like for all debtors, overrode all else and determined the outcome. But I might be totally off-base and it really is sunny days forever with "normal", predictable interest rates just up the road.
1:25 pm
January 9, 2011
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Its been a week and a half since Prime increased. I have yet to see any increase in anyone's deposit rates. Perhaps if the banks are going to take 100% of the increased rate spreads into profits, the only place to put money is in bank shares?? 
"Keep your stick on the ice. Remember, I'm pulling for you. We're all in this together." - Red Green
5:15 pm
October 21, 2013
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It's quite brazen. They had no difficulty increasing the lending rates immediately.
But, to be fair, the CUs have not offered anything either. And Meridian decreased their HISA rate just before the BoC hiked theirs.
6:21 pm
December 4, 2016
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They want to increase their profits first I guess.
When rates dropped. A day latter most rates dropped on HISA.
When rates rise. Almost nothing in terms of rates increasing on anything (GICs, HISA, regular savings accounts).
Need someone to break away. Than there will be movements. Right now they are all holding the line.
7:52 pm
April 6, 2013
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RBC Royal Bank did up the regular interest rate on their eSavings account from 0.5% to 0.65%.
10:48 pm
October 21, 2013
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Norman1 said
RBC Royal Bank did up the regular interest rate on their eSavings account from 0.5% to 0.65%.
If none of the others followed suit, then this might have simply been to sweeten their current promo, given competition from EQ and Oaken and even Tang for some folks.
I am not sure about RBC, but some of them were still lowering their deposit rates long after the last fall in the BoC rate. Meridian used to have a chart on their website which compared their HISA rate to the BigBanks'. This was only a few months ago. I remember noticing that soon after they posted it, it was out of date because the BigBanks' rates were even lower by then. That was last winter. They should have been poised to increase their deposit rates, just like their interest rates.
But, then, I've never thought they were strong on ethics.
3:00 pm
July 30, 2017
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I have seen no increase in gic or deposit accounts since the hike . is there a company or product that would reflect the recent hike in the interest rate they offer ? what about government bond for a discount broker ?
maybe there are better choices now than bank and credit union any one have any good ideas
4:09 pm
December 4, 2016
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In response to post above:
EQ Bank increased right before the hike. 2% to 2.3%.
It's an online bank and so offers an online savings account.
Tangerine and PC Financial probably will increase their promotional rates or include more people in them. Which usually range between 1.5% to 3.25%. They might increase that. Implicity increased GIC rates slightly. There are other higher options out there for GICs though.
Oaken, before the hike, increased rates on GICs and their regular savings account. Decreased the GIC a bit recently.
Mostly small movements. Should see higher movements in the 0.25% higher range. Only one that did that was EQ Bank at a 0.3% increase.
Most companies haven't moved. Likely to increase profits.
6:50 pm
October 21, 2013
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EQ's rate increase was several weeks if not months before BoC increase though, and it was understood to be largely related to Oaken's financial difficulties. Oaken too raised its rates in response to the same thing, not to BoC.
Meridian moved their savings rate DOWN just before the increase.
Considering that several FIs continued to lower their rates a while after the last BoC decrease, I wouldn't keep my hopes up. there must be some other factors at work here.
8:01 pm
December 4, 2016
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Loonie said
EQ's rate increase was several weeks if not months before BoC increase though, and it was understood to be largely related to Oaken's financial difficulties. Oaken too raised its rates in response to the same thing, not to BoC.Meridian moved their savings rate DOWN just before the increase.
Considering that several FIs continued to lower their rates a while after the last BoC decrease, I wouldn't keep my hopes up. there must be some other factors at work here.
It was pretty predictable at that time that the Bank of Canada (BOC) was going to increase their rates by 0.25%.
I agree Oaken had to increase GIC and normal savings rates in relation to a crisis. EQ Bank never was in a crisis. They did a measured response to a perceived possible issue. They likely factored in the possible BOC change at the time. If not made the change based on the BOC, to the issue that arose.
2:55 pm
April 6, 2013
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swan said
I have seen no increase in gic or deposit accounts since the hike . is there a company or product that would reflect the recent hike in the interest rate they offer ? what about government bond for a discount broker ?maybe there are better choices now than bank and credit union any one have any good ideas
Government bonds are really for those who have more money than they can easily get CDIC coverage for, like $10 million. 
These days, government bond yields are not that attractive compared to what is available to depositors who don't have such a challenge.
3-month Government of Canada treasury bills do track Bank of Canada rates closely. Before the rate hike, their yield was around about 0.5%, before commissions. Now, their yield is around 0.71% before commissions. In contrast, one can get an Oaken 90-day GIC for 2.10% with no commissions.
Five-year Government of Ontario bonds yield around 2.1% before commissions. Five-year, semi-annual pay, Oaken GIC are 3.2% with no commissions.
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