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Lowering interest rates on GICs
April 28, 2019
8:35 am
CHUCK21
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I'VE NOTICED THAT OVER THE LAST 6 OR SO MONTHS THE INTEREST RATES HAVE SLOWLY CREEPED DOWNWARD ON A ONE YEAR GIC. IT'S DIFFICULT NOW TO FIND ANYBODY OVER 3 PERCENT.
HAS ANYBODY GOT ANY INSIGHTS OR PREDICTIONS?
SORRY FOR THE CAPS.

April 28, 2019
9:40 am
Doug
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No problem for the CAPS LOCK, Chuck. I appreciate you noting that in your post, and for previously letting us know about your reason for using them. sf-cool

Put simply, the Bank of Canada's decision this past week to remove their bias (sort of Bank of Canada speak for like an indication to which way they're leaning with respect to future interest rate decisions) on future policy interest rate increases likely precipitated further downward pressure on GIC rates. Also, though, the banks' and credit union's interest rates are driven largely by the bond markets (i.e., the Government of Canada 5-year bond yield) in terms of pricing their mortgages and the funds (i.e., deposits) used to fund the mortgages. They're also awash in deposits and have far more deposits than mortgages, which is always a good thing anyway, but they're able to generate significantly greater deposit growth than their growth in new mortgages. So, when demand exceeds supply, why pay higher interest rates on GICs and impact your profitability? sf-cool

Much like the current stock market, right now, it seems to me you have to be quite tactical with your deposit issuer. Look for issuers, whilst staying within your CDIC ($100,000 including accrued but as yet unpaid interest) and/or CUDIC limits (which are usually unlimited), that might be needing the capital more than others and, as a result, are offering special GIC promos. Peoples Trust Company has a 3.10% non-registered or registered GIC while Motus Bank has 3.0% non-registered and 3.10 registered GICs.

Cheers,
Doug

April 28, 2019
10:31 am
CHUCK21
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HELLO DOUG,
AS ALWAYS YOUR UNDERSTANDING AND KNOWLEDGE IS APPRECIATED. OUT OF CURIOSITY ARE OR WERE YOU IN A FINANCIAL BUSINESS?
YES, I FOUND PEOPLES' PROMO AND MAY USE IT AS I'M ALREADY A MEMBER. I WILL BE LOOKING INTO HSBC NOW THAT I KNOW ABOUT IT.
THANKS AGAIN

April 28, 2019
10:37 am
CHUCK21
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P.S. OFF TOPIC BUT CURIOUS, ANY KNOWLEDGE OF ROMSPEN OR MORTGAGE CO. OF CANADA?

April 28, 2019
10:49 am
Doug
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CHUCK21 said
HELLO DOUG,
AS ALWAYS YOUR UNDERSTANDING AND KNOWLEDGE IS APPRECIATED. OUT OF CURIOSITY ARE OR WERE YOU IN A FINANCIAL BUSINESS?
YES, I FOUND PEOPLES' PROMO AND MAY USE IT AS I'M ALREADY A MEMBER. I WILL BE LOOKING INTO HSBC NOW THAT I KNOW ABOUT IT.
THANKS AGAIN  

Oh, if you've already got a Peoples Trust Company account, should be able to open an online 15-month GIC almost instantly then. That's good. As they're a small FI, I would recommend staying within your CDIC limit, though. sf-cool

Yes, I worked for HSBC Bank Canada at their downtown Kelowna (2008-09) and Westbank branches (2009-2014) as a Personal Banker (CSR). HSBC occasionally has decent promo rates on GICs, but I wouldn't touch their savings account as they often have only time-limited, new customer only promos. Their regular GIC rates are usually lower than even the "Big 5" banks. If you live outside the major metropolitan cities, access to an HSBC branch can be problematic, if you prefer to deal face-to-face. Those would be my only concerns. sf-cool

Cheers,
Doug

April 28, 2019
2:25 pm
Bud
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CHUCK21 said
P.S. OFF TOPIC BUT CURIOUS, ANY KNOWLEDGE OF ROMSPEN OR MORTGAGE CO. OF CANADA?  

Years ago when they got started they held a mortgage on the Sundowner strip club in Niagara i was like yikes but they seem to have done ok sorta one of the earlier success stories after the last real estate downturn. A lot of seniors got burned in direct mortgage pools in the past. To the industry they will never ever forget. They currently yield 10-12% before fees what does that say..

April 28, 2019
2:32 pm
Doug
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hotmony said

Years ago when they got started they held a mortgage on the Sundowner strip club in Niagara i was like yikes but they seem to have done ok sorta one of the earlier success stories after the last real estate downturn. A lot of seniors got burned in direct mortgage pools in the past. To the industry they will never ever forget. They currently yield 10-12% before fees what does that say..  

I agree with that. While well-intentioned in that I don't think they're Ponzi schemes or anything, the alternative, non-bank mortgage lending market (i.e., mortgage investment corporations) definitely has its ups and downs. For instance, I just happened to look up All Canadian Investment Corporation, which was based in Salmon Arm, B.C., and was a bit surprised to learn they'd gone bankrupt. They'd held a very long track record (probably close to 30 years) of offering consistent 7-9% annualized returns since inception. I guess it works, until it doesn't. However, I suspect a lot of the recent macro prudential regulatory changes that the federal Minister of Finance (Conservative and Liberal) and OSFI have made have done a number on them.

There are other alternative, non-bank lenders that you could look at (i.e., First National Financial Corp., which is the country's largest at nearly $100 billion in mortgages under administration, most of which are securitized off-balance sheet and they collect some nominal fees for administering them) or MCAN Mortgage Corp., but keep in mind you are buying the equity in the corporation much like you'd be buying equity in Equitable Group or Home Capital Group, parents of Equitable Bank/Equitable Trust and Home Trust/Home Bank, respectively.

Cheers,
Doug

April 28, 2019
6:19 pm
Bud
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Doug ur long-winded sometimes no offence cut to the chase

April 28, 2019
6:57 pm
Doug
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hotmony said
Doug ur long-winded sometimes no offence cut to the chase  

I know, sorry.

Cheers,
Doug

April 29, 2019
9:07 am
CHUCK21
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THANKS, I'M GETTING A LITTLE TWITCHY ABOUT MY MCOC ACCOUNT NOW AND WILL HALVE MY INVESTMENT. YOU'VE ALL BEEN HELPFUL.

April 29, 2019
9:14 am
Doug
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CHUCK21 said
THANKS, I'M GETTING A LITTLE TWITCHY ABOUT MY MCOC ACCOUNT NOW AND WILL HALVE MY INVESTMENT. YOU'VE ALL BEEN HELPFUL.  

Thanks, Chuck, glad we could help. sf-cool

What's MCOC? I assume a mortgage investment corp?

Cheers,
Doug

April 29, 2019
9:29 am
CHUCK21
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HI DOUG,
IT'S MORTGAGE COMPANY OF CANADA INC. THEY'VE BEEN SHOWING A 9.3 PERCENT RETURN. I'VE JUST BEEN TOLD THAT IT WILL TAKE 60 DAYS TO GET A PORTION OF MY FUNDS OUT.
ANOTHER QUESTION PLEASE, IS A GIC PART OF THE 100K CDIC INSURANCE.

April 29, 2019
9:39 am
Doug
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CHUCK21 said
HI DOUG,
IT'S MORTGAGE COMPANY OF CANADA INC. THEY'VE BEEN SHOWING A 9.3 PERCENT RETURN. I'VE JUST BEEN TOLD THAT IT WILL TAKE 60 DAYS TO GET A PORTION OF MY FUNDS OUT.
ANOTHER QUESTION PLEASE, IS A GIC PART OF THE 100K CDIC INSURANCE.  

Hi Chuck, yeah, the MICs can have liquidity issues withdrawing your funds, especially when they're challenged. If you can get your funds out in 60 days, that's not bad.

Yes, GICs are part of your CDIC insurance limit. CDIC insurance is per depositor at CDIC member issuer. For greater clarity and certainty, I could have 10 GICs, 3 savings accounts, and a chequing account, in my own name with a single CDIC member and they'd be insured together for CDIC purposes.

Any savings accounts and GICs you have in an RRSP are insured separately from your non-registered savings accounts and GICs.

If you have a RRIF or a TFSA, those, too, are insured separately from your non-registered and RRSP CDIC deposit insurance limits.

You can also have a bank draft outstanding for $100,000, which is insured separately, though it's not immediately clear how CDIC tracks this because you could have two different customers make two drafts payable to the same person and not know what the other customer is doing. I assume CDIC uses the bank draft serial number for the purposes of CDIC insurance. Downside of this is that an uncashed bank draft bears no interest, but if your concern was CDIC insurance on everything, that's one possibility.

Also, if you have a joint account with a family member, that's insured separately, too. Similarly, many FIs have two or more different subsidiaries (especially the "Big 5") so it's often possible to have millions of dollars CDIC insured by tactically placing those deposits into different ownerships, different types of accounts (registered and non-registered), and in different institutions owned by the same company.

Cheers,
Doug

April 29, 2019
10:47 am
CHUCK21
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THANK AGAIN, YOU'RE A FONT. I'VE JUST OPENED AN ONLINE MANULIFE ACCOUNT AT 3.35 PERCENT. IT WAS A SNAP.

May 3, 2019
7:08 am
GR
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GIC rates continue to move down.
Rapport Credit Union (Ontario) 1 year GIC down from 3.10% to 2.10%!
Habib Canadian Bank 1 year GIC down from 2.80% to 2.50% through agent or 2.45% direct.

May 3, 2019
7:48 am
Doug
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GR said
GIC rates continue to move down.
Rapport Credit Union (Ontario) 1 year GIC down from 3.10% to 2.10%!
Habib Canadian Bank 1 year GIC down from 2.80% to 2.50% through agent or 2.45% direct.  

Wow, big drop for Rapport (wonder if they're fans of the former Colbert Report, which he pronounced Rapport?)

Interesting Habib's broker rate is higher than the direct rate. That's also quite a drop. I'd definitely go with them over Bridgewater Bank, but 2.50% isn't that great for a 1-year. You can do better with Oaken Financial and about the same or slightly less with EQ Bank. Habib is now out of the running for any deposit business, at least from this crowd, I think. Heck, you can do only 20 bps less in a savings account. Not a significant difference on even $100,000. sf-cool

Cheers,
Doug

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