Bank of Canada raises benchmark interest rate to 1.5% | General financial discussion | Discussion forum

The Royal Bank has raised its prime lending rate after the Bank of Canada increased its overnight lending rate to financial institutions.

RBC says it will increase its prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday [July 12].

From Rob Carrick in the G&M -

Recognize that you’re getting hosed with most high-rate savings accounts

The most disappointing aspect of the rate increase over the past year is the lack of meaningful increases in returns from high-rate savings accounts. While banks have been increasing lending rates in lockstep with the Bank of Canada, they have been lagging on savings.

You can get 2 per cent to 2.3 per cent from a few players including Alterna Bank and EQ Bank, both of which are members of Canada Deposit Insurance Corp. (CDIC). But there are far too many banks paying something in the low 1-per-cent range, which is roughly half the current level of inflation.

The Canadian High Interest Savings Bank Accounts website has a chart of banks offering the best rates. Use it to make sure you’re not getting hosed. [there's a nice plug for your Forum, Peter!]

Consider one-year GICs for savings

Finally, some positive news for savers and conservative investors. Guaranteed investment certificates with a one-year term happen to be a sweet spot right now. Oaken Financial has a 2.8-per-cent one-year GIC available, and it offers CDIC protection.

Value alert for clients of the online banks Tangerine and Simplii Financial – both offer a weak rate of 1.1 per cent on savings, but an excellent rate of 2.5 per cent on one-year GICs. If you can lock up your money for a year and want zero risk, this is worth a look.