Rate drop 1.50% | Wealth One Bank of Canada | Discussion forum

I’m glad I never moved money from EQ to W1 then! Gotta support EQ’s rate stability over the long term.

Loonie said
I can't recall a time, at least since I joined this site, when there was so little competition in HISA rates among the top 5 or 10 alternative FIs. There is almost none, and no point in moving your money anywhere.

They are are all huddled under the same tarpaulin, waiting for the rain to stop. Any FI that stands out as having a superior rate will have reduced it by the time your money arrives (except for promos with defined period for the rate in question). None of them want more deposits, it seems.
  

From G&M of Sept 21st (behind paywall), this quote

Canada’s household savings rate soared to 28.2 per cent in the second quarter, according to Statistics Canada, as the pandemic forced people to stay home. It was the highest savings rate “by far” in the past 60 years, according to Doug Porter, chief economist and managing director at Bank of Montreal.

In comparison, the savings rate was 7.6 per cent in the first quarter, when the COVID-19 shutdowns started, while the average for all of 2019 was 3 per cent.

In total, Canadians added a whopping $127-billion to savings and chequing accounts and term deposits in the first half of 2020, up from an average of $32-billion during the same period in the previous three years, according to data from Investor Economics.

Mr. Porter estimates the savings rate to pull back to about 15 per cent in the third quarter and 11 per cent in the fourth quarter, “both still very high rates.”

With the disruptions of the pandemic, the financial press such as MoneySense have all been recommending the building of Emergency Funds and people are listening, recognizing it is risky business not having a cash reserve. Fewer people are spending and incurring more debt, so I can believe banking institutions could be awash with cash with few to lend it too. Until this pandemic is under control in one way or another, I suspect deposit rates will continue to slide, perhaps substantially.

Loonie said
It's curious that this nation, which we are normally told is awash in personal debt, can suddenly support great savings rates when the incentives to spend are removed.. I would have expected an article like this to tell us that people are paying down their debts. But it must be those who are already have money who are just getting richer.

This prompted me to check my on figures, as I have never done this calculation. Turns out that we retained 55% of gross income over the first nine months of this year. I would guess this is about average for us, maybe slightly high. People like us are probably skewing the stats while others are going into debt trying to stay afloat.

I don't think we can necessarily conclude that people are building better nest eggs, although let's hope that some are. Some already have significant nest eggs and are accumulating more. Others are losing their jobs and using up their savings. Some, in the middle will have found there is simply less to spend on, especially when vacations are foregone. And some may be paying down debt or saving up for the next disaster.

In any event, there is clearly a growing imbalance between savings and loan potential, which does not support higher interest rates.  

True. I know how much I saved this year. A couple investments. My budget says I save $X,XXX annually. The actual savings exceeds my budget savings. Keep up the good work.

Loonie said ... This prompted me to check my on figures, as I have never done this calculation. Turns out that we retained 55% of gross income over the first nine months of this year. I would guess this is about average for us, maybe slightly high. People like us are probably skewing the stats while others are going into debt trying to stay afloat. ...

This is a very unusual year. The Household Savings Rata data AltaRed provided is shown graphically below.

Statistics Canada defines Household Savings Rate as follows:

We don't have any of the transfers indicated and I just call it 'Surplus Rate'

For this year to date, we have a Surplus of 74.13%. Have not had a Surplus this high since 2005, the year I retired and had an influx of income upon termination of employment. Surplus for 2019 was 65.78% and the average from 2003 to date is 47.39%. Truly, these are unusual times.

Seems to me, it is the old story of supply and demand. If money is scarce, FI's are willing to pay you more for use of it. Governments have a vested interest to keep rates low - they have assumed massive debt too and need the super-low interest rates.

We will have an increasingly high income stream for the next few months. I saw the writing on the wall in early 2018 and went all-in on 2-yr GIC purchases. The active GICs we have are all >3% but they are maturing on a monthly basis and will be all gone by July 2021.

We are clearly not hurting but there are many people that are. I don't begrudge them any of the assistance they are receiving from government and we wish them well.

My next big hurdle is to figure out how to correct the mistake I made by not retrieving our RIF funds on a timely basis. I will use the period of coming lower income to help facilitate this. A small issue compared to figuring out how to put food on the table and/or where the next paycheque is coming from.

There is no doubt that the “less spending” will keep FIs at a low interest rate. It’s not real saving though, because it’s being forced by a virus, lockdowns and government enforced restrictions. I feel quite confident that once a well functioning vaccine is available, all those new “savings” will disappear. There may be some people that actually change their lifestyle, but I think most will go back to the same old lifestyle habits.