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GIC Rates Up Again
April 11, 2022
10:30 am
rodeworthy
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removed on edit

April 11, 2022
11:43 am
Dean
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.
And on a related subject, today's email from EQ Bank . . .
.

    Hi Dean,
    .
    We’re on a relentless mission to bring you smarter banking solutions and a whole lot more value—that’s why we’re excited to announce an increased interest rate on the Savings Plus Account, Joint Savings Plus Account, TFSA Savings Account, and RSP Savings Account:
    Say hello to 1.50% everyday interest*.
    .
    This rate increase comes into effect today, and is applied automatically to your account.
    .

    . . .

Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 11, 2022
12:50 pm
Vatox
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Sounds good to me!sf-cool

April 11, 2022
12:57 pm
cgouimet
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Dean said
.
And on a related subject, today's email from EQ Bank . . .
.

    Hi Dean,
    .
    We’re on a relentless mission to bring you smarter banking solutions and a whole lot more value—that’s why we’re excited to announce an increased interest rate on the Savings Plus Account, Joint Savings Plus Account, TFSA Savings Account, and RSP Savings Account:
    Say hello to 1.50% everyday interest*.
    .
    This rate increase comes into effect today, and is applied automatically to your account.
    .

    . . .

Dean  

Smarter banking solutions? Joint GIC's might fit that bill ...

CGO
April 11, 2022
1:33 pm
lifeonanisland
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cgouimet said

Smarter banking solutions? Joint GIC's might fit that bill ...  

I'd add to that offering spousal RSPs...

April 11, 2022
2:09 pm
cgouimet
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lifeonanisland said

I'd add to that offering spousal RSPs...  

OK. But joint GIC's would be really simple...

CGO
April 11, 2022
2:11 pm
lifeonanisland
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cgouimet said

OK. But joint GIC's would be really simple...  

And Spousal RSPs wouldn't be? EQ is about the only institution in Canada that doesn't offer them. Why?

April 11, 2022
2:15 pm
cgouimet
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lifeonanisland said

And Spousal RSPs wouldn't be? EQ is about the only institution in Canada that doesn't offer them. Why?  

Paper work is much simpler for joint non registered accounts. That's all.

CGO
April 15, 2022
7:51 am
hwyc
GTA
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15m 3.05%
27m 3.60%

Refer to GIC chart for 1-5yrs after EDT noon refresh today

April 15, 2022
8:09 am
AltaRed
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cgouimet said

Paper work is much simpler for joint non registered accounts. That's all.  

I agree that if EQ Bank does not want to go there (joint GICs, spousal RRSP, etc.) with extra administrative burden, why not just accept it as their business model? Go elsewhere if one wants joint GICs and/or spousal RRSPs.

That all said, it will be interesting what they might offer once they complete their acquisition of Concentra and become larger than LBC in assets. Their offerings may have to accommodate more services to play in that league.

April 15, 2022
9:52 am
Koogie
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EQ in particular is quite paperwork phobic. I've been a personal client for years but they still won't offer me a small business account (HISA or GIC). Mostly due to all the extra paperwork involved.

April 18, 2022
10:16 am
andied20
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The thread title is "GIC Rates Up Again" and looking on the EQ website, I see the rate for a 5 year GIC is now 3.85%, and a 5 year fixed mortgage is 3.64%. How does EQ make a profit?

April 18, 2022
10:55 am
Norman1
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andied20 said
The thread title is "GIC Rates Up Again" and looking on the EQ website, I see the rate for a 5 year GIC is now 3.85%, and a 5 year fixed mortgage is 3.64%. How does EQ make a profit?

Equitable Bank and others are not lending that 5-year 3.85% GIC money out as such residential mortgages. The funds are likely being lent out as commercial mortgages for around 4½% to 8½%.

April 18, 2022
2:48 pm
MattS
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its possible EQBANK wants to keep paperwork to a minimum and keep things ultra simple to keep paperwork processing fast with no overstaffing. that way they can still offer no fee banking. When I Xferr'd my RRSP out before their rates went up not 1 penny in fees. Where else do you get that. Costs me $50 everytime I chase the highest 5 yr offering upon renewal everywhere else.

April 18, 2022
3:17 pm
Loonie
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Norman1 said

andied20 said
The thread title is "GIC Rates Up Again" and looking on the EQ website, I see the rate for a 5 year GIC is now 3.85%, and a 5 year fixed mortgage is 3.64%. How does EQ make a profit?

Equitable Bank and others are not lending that 5-year 3.85% GIC money out as such residential mortgages. The funds are likely being lent out as commercial mortgages for around 4½% to 8½%.  

If that is so, then where are they getting the funds for five year terms on new residential mortgages at the rates mentioned?

April 18, 2022
3:31 pm
AltaRed
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deleted

April 18, 2022
7:30 pm
Norman1
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Loonie said

If that is so, then where are they getting the funds for five year terms on new residential mortgages at the rates mentioned?
 

Alternate lenders, like Equitable Bank and Home Trust, actually don't want to keep those prime residential mortgages. But, they do them to keep their network of mortgage brokers from starving in between originations of near-prime and non-prime mortgages. See previous post.

They fund those prime mortgages using short term deposits, one year and under, for the short time between when the mortgages are originated and when the mortgages are transferred to a pool and securitized. They then collect a small fee for servicing the mortgages (collecting the mortgage payments, answering questions from the borrowers, and disbursing the payments to the investors). That's called an originate-to-service business.

In effect, those mortgages are ultimately funded by investors who buy the mortgage-backed securities of the pools.

April 19, 2022
10:32 am
Loonie
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I appreciate the information on how this works.
However, in my view it contradicts your earlier statements that all new mortgages are matched with GICs of equal duration at time of purchase. You will say that they are ultimately matched by those who buy the mortgage-backed securities, but that is indirect and cannot be said to be a match at time of purchase - your previous thesis in regards to other banks. Where do they find people who are willing to buy GICs at (yesterday's) lower rates when they are rising so rapidly?

Prime mortgages may not be their preference but they sure do a lot of them - as I read it, $7.6 billion as opposed to 14..4 alternative residential and a total from all types of commercial loans of 10.4
Seems to me that if prime residential are funded by shorter deposits, it's a profitable business for them.(annual report last December - I lost the link but wrote down numbers)

I can see where they might be laughing all the way to the vault by taking GICs from us and charging commercial borrowers a lot more for that money, but those opportunities are not always available and they are higher risk. They need those houses.

April 20, 2022
8:15 am
Norman1
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That matching of mortgages to deposits is done for the mortgages that the financial institution keeps for itself. There is no need to match mortgages that are flipped to investors.

A five-year mortgage that is securitized and flipped to investors in a few weeks or few months only needs to be funded by the financial institution for that short period of time.

Those prime mortgages are insured. Insured by CMHC, the mortgages or the mortgage bonds issued by the pool of mortgages end up with CMHC's DBRS debt rating of AAA. That's the same as Government of Canada bonds.

The going rate for AAA-rated five-year Government of Canada bonds is around 2.7% per annum and not 3½% or 4%.

April 20, 2022
10:50 am
Loonie
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My head is spinning.
How can a mortgage which costs 3.5 or 4% be turned into something that only pays the lender 2.7%?

Not all mortgages are CMHC insured. Mine never was as we put down more than the minimum. However, Equitable's may not fit that category.

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