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November 2014 rate increase from 1.95% to 2.00%
November 8, 2014
8:37 am
Peter
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Both the TFSA and regular savings account rate have gone up.

They've matched Achieva Financial for the highest savings account interest rate now.

I've noted this on the comparison chart:
https://www.highinterestsavings.ca/chart/

November 8, 2014
9:25 am
martin14
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Peter said

Both the TFSA and regular savings account rate have gone up.

They've matched Achieva Financial for the highest savings account interest rate now.

I've noted this on the comparison chart:
https://www.highinterestsavings.ca/chart/

Thank you Peter.

That's 2 now.

hmm, interest rates weren't supposed to go up until middle 2015.
Jobs growth isn't good.
Seems house sales have hit the wall everywhere except TO and Van.
Oil dropping daily
Dollar in free fall.
Worrying about deflation.

Wonder why the CUs are now raising rates ?

November 8, 2014
9:31 am
Greg Franklin
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Peter, thank you for the info on the rate increase. Well it is good news that there is some rate increase for savings and TFSA accounts, it is only a 5/100 of an increase or 0.05% increase.

This means for every $1,000 balance, it is 50 cents more interest after 1 year. A $100,000 balance would give $50 more interest after 1 year if the rates stay at 2.00%.

I remember when savings account rates were 4.00% to 5.00%.

November 8, 2014
1:04 pm
Loonie
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It seems to me that during this year we have repeatedly seen rises in shorter and shorter terms, often with decreases at the longer end (or, at the very least, stability). The shortest term is a daily rate.

Someone with a stronger background in economics than mine can probably identify this trend and its meaning. Overall, I don't think they are paying out any more interest than they were before in real dollars.

.

November 8, 2014
1:25 pm
Jon
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Loonie said

It seems to me that during this year we have repeatedly seen rises in shorter and shorter terms, often with decreases at the longer end (or, at the very least, stability). The shortest term is a daily rate.

Someone with a stronger background in economics than mine can probably identify this trend and its meaning. Overall, I don't think they are paying out any more interest than they were before in real dollars.

.

Loonie, this suggest FI generally think interest rate, and inflation (the two correlate heavily historically) will not rise significantly in the long run, which is a very problematic conclusion because it imply low inflation in the long run and people will be less incline to buy durable goods as they expect price is steady or even decline (for the top 20/30%) relative to their income. (A Keynesian conclusion here, maybe incorrect through as we can observe the IT equipment market, the demand did not decline even price continuously decrease as suggest by Moore's law )

November 8, 2014
1:47 pm
Loonie
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Thanks, Jon. Yes, I think below-norm inflation is ultimately a concern because of the way our crazy economy is structured. On the other hand, I think we may see a different configuration for inflation than we are perhaps used to seeing. Inflation is usually defined as the cost of a basket of expenditures which are considered normal for a family. We don't all buy the same stuff. But we all have to pay for certain stuff, especially rent/mortgage, food, and utilities. What I see happening around me right now is that utilities, and in some areas housing, are far outpacing the CPI. Ontario, for instance, just announced that hydro rates will increase 3.5% per annum for the next umpteen years, I think it was 20 - and you can be sure there will be additional increases along the way as well. My water rate went up 9% last January, and heaven knows what it will be next January. I guess some of us can be grateful that oil is down, for the moment, although I don't personally heat with oil and we only drive about 10,000 km/yr and will be phasing out car ownership over the next 10 years. Also a lot of food is increasing in cost significantly (fish and vegetables in particular). Climate change is creating droughts and other disturbances which affect agriculture and food production, e.g California, where most of our veggies come from, and a lot of our fruit.

In other words, discretionary expenses may be going down, skewing the rate of inflation, but fixed expenses are going up disproportionately. I don't know what the economists make of that, but for me it's a red flag about expenses versus income, and may obscure the functional rate of inflation for families.

I need to revise part of what I said earlier. I just checked the Accelerate website. In addition to increasing the daily rate, they have also increased the 5, 6 and 7 year rates by 5 basis points, so it's not universally true that longer term rates are going down, although theirs are still not the highest available.

November 8, 2014
2:15 pm
Jon
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Loonie, you are suggesting a even more problematic situation. You basically say our inflation is not cause by high demand in goods where factory don't have the output to handle it, so they can only increase price (demand - pull inflation), but rather, a situation where the price for raw material increase (cost-push inflation). This is going to reduce our disposable income and damage economic recovery as our income drop relative to price level.....

No wonder the wealthy one is getting wealthier! As their expense is mostly disposable, they can keep their saving level just by slightly reducing their expense, while most of us can't as our expense is dominate by non-discretionary expense. That also explain why the price for other goods are suppressed and there isn't any massive increase in inflation over the board, as you have suggested, thanks to the fact the wealthy and middle-upper class spend less money in non-discretionary area, such as vacation or new car.

November 8, 2014
2:46 pm
Greg Franklin
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Loonie, to make what you are saying many times worse, older Canadians and retirees or near retiring that have GIC's and bonds used to get 4.50%, 5.00%, 5.50% just 5 to 11 years ago.

Shopping around for 5 year GIC's, only maybe 6 to 8 financial institutions are paying 2.85% to 3.05%. If you look at 1, 2 or 3 year GIC's, that is worse, 2.40% to 2.65% but very few maybe 8 financial institutions. Look at the rest, maybe 15 to 20 financial institutions 2.30% to 2.65% 5 year GIC's, http://www.cannex.com.

If a couple has say $400,000 in RRSP's and non-registered GIC's at today 5 year rates or say a combination of 1-5 year GIC rates or maybe 2, 3 and 5 year rates, a 2.00% to 2.30% lower annual interest income works out $8,000 to $9,200 a year or $667 to $767 a month.

Even after income taxes at a low tax rate of 20%, for most retirees or those near retiring that do not have significant pension income, other sources of income, it is still $533 to $613 a month in net lost interest income.

This can pay your property taxes, water and maybe 50% of gas and electricity bills. This is the double hit nobody I can tell has even mentioned this. When you think that things can't get that bad, they do.

Unfortunately, we are all stuck.sf-confused

November 9, 2014
7:31 am
bb123
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In reference to the comments as to why rates seem to be increasing, I think many are reading too much into it. If you want a good indication of what rates are going to do, watch the Bond market. The Bond market will move based on rate expectations of investors. The recent moves in rates, in my mind, is simply competition for people's deposits. If it was a trend you would see these institutions increase their mortgage rates at the same time. They haven't. So they obviously have high loan and mortgage demand and are in need to fund that with customer deposits. It's all good for as long as it lasts. But unless I see some movement by the "parent companies" on their mortgage rates, I think these rates could just as unexpectedly decline without notice just like they rose. FI's have tight margins compared to what they used to earn. Especially those in Manitoba. So they will need to manage this carefully I'm sure.

The Bond market hasn't moved much for a very long time on the short end. In the 4 & 5 year lengths, the bond rate dropped to as low as I've seen them in the 7 years that I've watched them just a few weeks ago. I was expecting mortgages and GIC rates to decrease but they've bounced back up since then. Still at record lows however. I currently don't see much in the market to suggest that any rate movement at this time is anything more than competitive driven.

November 9, 2014
1:47 pm
Brimleychen
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Greg Franklin said

Loonie, to make what you are saying many times worse, older Canadians and retirees or near retiring that have GIC's and bonds used to get 4.50%, 5.00%, 5.50% just 5 to 11 years ago.

Shopping around for 5 year GIC's, only maybe 6 to 8 financial institutions are paying 2.85% to 3.05%. If you look at 1, 2 or 3 year GIC's, that is worse, 2.40% to 2.65% but very few maybe 8 financial institutions. Look at the rest, maybe 15 to 20 financial institutions 2.30% to 2.65% 5 year GIC's, http://www.cannex.com.

If a couple has say $400,000 in RRSP's and non-registered GIC's at today 5 year rates or say a combination of 1-5 year GIC rates or maybe 2, 3 and 5 year rates, a 2.00% to 2.30% lower annual interest income works out $8,000 to $9,200 a year or $667 to $767 a month.

Even after income taxes at a low tax rate of 20%, for most retirees or those near retiring that do not have significant pension income, other sources of income, it is still $533 to $613 a month in net lost interest income.

This can pay your property taxes, water and maybe 50% of gas and electricity bills. This is the double hit nobody I can tell has even mentioned this. When you think that things can't get that bad, they do.

Unfortunately, we are all stuck.sf-confused

It is exactly what is happening as you described. Sadly, BOC and almost central banks in the world are flooding the world with free money like no tomorrow. There are some evidences that the hot money is leaving Canada now. The c $ is dropping in the past months. We still didn't see the impact in the bond market yet. It will take some time to show. For the small financial firms, the depositorsx are still providing more attractive source of money, than the bond market. The oaken financial needs to pay more that 4% (home equity group) to get the money, plus fee to pay to bankers.

For the hydro, and water rates, I believe part of them are mismanagement of the govt. In fact, the electricity market rate has been stable in the past year.

November 10, 2014
1:00 pm
Greg Franklin
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Brimelychen, our adviser warned us after the 2007-2008 financial meltdown but we did not listen on locking in rates of 5%+ on bonds instead of GIC's for about 50% of our total investments. It looks like it will either go to an interest environment of flatten rates, up and down range of maybe 25 to 40 basis points or 0.25% to 0.40% range.

If it gets worse, watch out, 3.00% 5 year GIC's can easily turn into 2.50% to 2.60% 5 year GIC's. The point about the lower Canadian dollar versus the U.S. dollar and other major currencies to a lesser extent, this will create higher inflation from imported stuff we buy.

The Bank of Canada Governor has said he wants to increase Canadian exports and a falling Canadian dollar and low to lower interest rates keep the Canadian dollar low to lower. It is down at least 11% Canadian dollar versus U.S dollar in the last 11 to 12 or so months.

Brimleychen energy costs especially electricity bills going up double in 8 years in Ontario is due in part to the green energy policies, solar, wind etc. of the Ontario government since 2004 and costs overruns of nuclear power plants is another factor as well.

Please write your comments in the forum.