May 28, 2013
December 23, 2011
What a joke!! Savings rate drops .5%. And they don't have a one year term. All their rates are lower than most of the other Winnipeg CU's. I guess the survey they just asked us to do gave them some confidence???? From a pure investment perspective my responses were not favourable. Wish i never signed up for their cumbersome methods as it is all well and good to use them as a hub but the "holds" just add to a lengthy process.
August 1, 2013
Kanaka, I understand your frustration and disappointment. Longer term interest rates are going up since May-2013, more than 6 months now.
I am hearing that the Bank of Canada is preferring the recent lower Canadian dollar to boost exports and Canada's economy but if this does not happen, they are signaling that they may need to cut their Bank of Canada bank rate and this will impact high interest savings accounts and short term deposits to maybe 1 year GIC rates.
It could be 25 basis points but some say if things get bad with a declining Canadian housing market and resource prices staying lower to going lower then it could 50 basis points in the next 6 to 12 months.
I learned that these high interest savings accounts are offered by financial institutions but they do not like them because you can get easy access to your money anytime within days.
They need to lend out money from fixed deposits for 2 years, 3 years, up to 7 years and that is where they make their real profit on the spread of difference of higher mortgage rates, car loan rates, line of credit rates or home equity loan, line of credit rates etc. and their other higher lending rates.
They just have these types of accounts hoping that eventually depositors will put some money in GIC's with fixed rates, terms and the longer, the better.
You have today, December-5-2013, government guaranteed fixed rate investments like provincial strip bonds that are paying the highest net yields of 4.30% for 14.5 year maturities, 4.35% for 16.25 year maturities, 4.35% for 19.25 year maturities, 4.37% for 17.23 year maturities and 4.40% for 21.5 year maturities.
This is about 2.39 times to 2.44 times more annual simple interest per year and when compound interest is taken in account for 14, 19 21 years, it is even much worse.
For example, the highest 21.5 year 4.40% net yielding provincial strip bond is a 2.44 times higher interest rate versus Hubert Financial's 1.80% savings account rate.
After 21.5 years of compound interest, it is much higher, it is almost 3.26 times higher with Quebec's 2035-June-1 strip bond annual after compound interest rate of 7.0875% versus Hubert Financial's annual after compound interest rate of 2.1744%.
There is also available a little shorter term provincial strip bond by about 3.5 months that is yielding the same as Quebec 2035-June-1, it is Hydro-Quebec 2035-February-15 4.52% gross market yield, 4.40% net yield commission included.
You can see many of these provincial strip bonds at http://www.canadianfixedincome.ca.
You can see why having all of ones money in savings accounts over decades gives easy access and liquidity but there is a longer term huge financial cost indeed.
This why you need a combination of different terms, maturities, variable, liquid and fixed government guaranteed investments to achieve a long term decent nest egg, retirement and wealth.
I hope this information and my post is useful and helpful for someone. keep reading and showing interest, patience in my posts.
Thanks, from from SD2013.