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Email this9:26 pm
just wondering when the bank rasies the rates, BOC I mean,
will savings accounts go up the same rate or higher?
10:41 am
March 25, 2009
Offline
For us savers, let's hope so.
Cash is king when debt runs rampid.
Have a great day
10:26 pm
i am just asking, when the BOC raises rates 0.25%
will say peoples trust also raise their rates the same?
they are at 2.1%
and the boc rate is 0.25
so if the boc rate is 0.50
will peoples trust go to 2.35%
12:24 pm
Doubtful. There is no 1-to-1 relationship between the BOC overnight rate and saving rates. It will indirectly and eventually influence them, but other factors need to be considered, the most important of them in my opinion is competition between financial institutions.
Especially in the case of People's Trust since they already have the top rate on the market at the moment. Unless other banks bother to match what they're offering, they have no lucrative reason to raise their rate.
2:49 pm
competition between the online banks is secondary to the real driver of interest rates: demand for cash. if the banks need more cash to finance their business activities (investing in the markets, mortgages, business financing, etc...), and cash is in short supply, then and only then will the banks start raising their interest rates to attract cash deposits. given the enormous amount of cash that has been pumped into the global economy over the past year or so, i don't see demand for cash increasing anytime soon.
7:06 pm
what do you mean? there is a one on one relationship to the boc overnight rates and savings rates, just look at the history of savings rates and boc rates over time, every bank lowers or highers their rates based on what the boc does
2:18 am
The overnight rate started 2009 at 1.5%. It reached its minimum low of 0.25% before the end of April. A 1.25% decrease in less than 4 months.
The big 5 banks were offering savings rates around 2.5% at the beginning of 2009. Those rates reached a minimum of 0.75% in September. A 1.75% decrease over 8 months.
They obviously migrate in the same direction but I don't call this a 1-to-1 relationship.
Bottom line is don't expect your savings rate to increase accordingly the day following an increase of the BOC's overnight rate.
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