Peoples Trust is still #1 out of all the high interest savings accounts in Canada at 2.25%, but why drop the rates when no one else has?
Here's some possible explanations I received after discussing with their deposit services manager Jeanette Curtis. She explains that although their financial situation is still okay (They made a NET INCOME profit of $9,000,000 for 2008) they had to lower their rates to maintain profitablity, since paying out interest to customers is one of their biggest expenses!
Canadian Tire and Maxa Financial both offer 2.00% on their high interest savings account, so Peoples is still slightly better. With the federal government not touching lending rates for at least a year, one has to wonder why on earth would you lower your rates when no other bank has lowered theirs? Is Peoples Trust now financially in trouble? Or have they decided that they no longer need to attract depositors or pay good rates anymore on their high interest savings accounts?
If they lower their rates again next month, I will for sure pull my $325,000.00 out and invest that money in real estate(Rental apartment) or start a small business!!!
Why do you have that kind of money sitting in a savings account? Do you know how much interest you've been throwing away? Even in this climate there are much better options. You should be looking at banker's acceptances (commercial paper) which are paying around 3.6% to 4.1% right now. As for why PT lowered their rate, the answer is simple: "because they can". They know most of their customers aren't going anywhere.
You said it yourself Roc...Peoples Trust is still #1 with their interest rate (even after the slight downgrade). You also mentioned that paying out interest to customers is one of their greatest expenses. Basically, Peoples Trust just significantly reduced their expenses while maintaining the top HISA rate. This move should come as no surprise to the visitors of this site...this sort of thing happens all the time.
On a similar note, I am glad to see Roc posting again. I hope you are able to find a better use for your massive savings. Best of luck with your potential small business or becoming a landlord!!!
If you have $325K sitting in savings and don't understand why an institution that is having marginal profitability like Peoples Trust needs to lower their rates to even the highest side of the competitive spectrum, I advise that you stay entirely away from commercial acceptance, corporate bonds or any other highly variable product class. In fact, you may want to begin laddering some of this money into various term deposts, maximizing your return with a full deposit guarantee. Some of the best rates available, with a 100% principle guarantee can be found with Achieva Financial online at http://www.achieva.mb.ca.
Are Achieva products covered by CDIC? I didn't see any info about that on the website, good rates though.
As for the earlier comments, borrowers want lower rates, savers want higher, it's never going to be good for both. When the BoC rate is this low and banks who have variable mortgages out there see lower interest payments on top of losses from 2008 it ain't good for savers. You have to think big picture. Real estate is probably good deal right pretty much anywhere in the world right now!
All credit unions in Manitoba are 100% guaranteed to any limit!!! The Credit Union Deposit Guarantee Corporation of Manitoba states this at their website: http://www.cudgc.com
I've been with Achieva Financial for 2 years before moving my money to Peoples Trust only because of Peoples higher rate(1.85% for Achieva vs 2.25% for Peoples). Although I'm taking a huge risk putting $325,000 in an account that's insured for only $100,000 I plan on pulling all my money out soon!!!
Recently I've seen a steady decline in rates at Peoples(They were 4.00% in Dec/08) and now at a disappointing 2.25%!!!!There was absolutely no reason for the sudden decline in rate from 2.50% to 2.25% for the month of July. I'm taking control of the situation rather than sit and wait for the rates to drop again in the future!!!!
So I've decided to purchase a rental property with this money here's what I'm considering. A six-plex with 5 two bedrooms, 1 one bedroom, no vacancy, coin laundry facilities, 30 yr old building, income of $800/month for 2 bedrooms and $650/month for 1 bedroom so that's $4650/month total( minus taxes $6000/yr, insurance $2000/yr, grass cutting/snow removal $2,000/yr)...... asking price.....$540,000.00!!!!
Which is the better deal? Purchase this rental property or leave the money at Peoples Trust earning 2.25%???With a downpayment of $325,000 that leaves a mortgage of $200,000 @2.75% 5 yr variable for 25 yrs!!!
"Real estate is probably good deal right pretty much anywhere in the world right now!"
If you enjoy losing money. Who in their right minds would buy Real Estate right now? Top of the Canadian Housing price Bubble! Madness and financial suicide.
Interest rates are at the lowest they can go, there is only one direction they can go, that's UP. Great news for savers, horrible news for people in debt that are just managing. I predict by the end of next year you will see 8-10% mortgage rates and 7% by end of 2009.
Then savings accounts will rise again.
Roc "Which is the better deal? Purchase this rental property or leave the money at Peoples Trust earning 2.25%???With a downpayment of $325,000 that leaves a mortgage of $200,000 @2.75% 5 yr variable for 25 yrs!!!"
Leave it in the savings. A 2.25% increase on your money will be better than a 10-20% decrease on your money in Real Estate right now.
The 2.75% Var rate sounds good, but what will it be in just 1 or 2-4 years down the road? Not 2.75%! Look at 6% Var in 5 years, can you still carry it does it look attractive to you?
There is a reason why it's for sale, THEY want OUT now.
Buying rental properties as investments can look good on paper, but the shine definitely wears off after you've been a landlord for a few months. Chasing after delinquent tenants, trying to collect security deposits after damage is done, mediating disputes between tenants, dealing with late-night calls by police to attend the property because one of your tenants has been growing pot in his unit, breaking up fist-fights, steam-cleaning pee out of the stairwell carpets, rodents, ants, property taxes that always seem to go in one direction (up), common area utility bills that never stop rising, trying to kick tenants out (most of whom are knowledgable about the landlord/tenant legal process and know how to delay everything and force you to let them stay while the process unfolds), and dealing with ever-rising commercial property insurance premiums can get to you after a while. Of course, you could hire a property management company to deal with some of these issues (like collecting rent and chasing after delinqiuent tenants), but after you pay the management company fees, you might not be as far ahead as you were expecting. Most people I know who ventured into rental properties wich they did something else.
You also need to factor in repair and replacement costs, such as a new roof, plumbing and heating, carpets and flooring, applicances if you are supplying them, cupboards, doors, windows, painting and just general maintenance. And repairs to walls that may be damaged as tenants move furniture in and out.
And while the units are full now that won't always be the case. When a tenant leaves the may be a lag of at least a month while you repaint or repair the apartment or just because a new tenant is not able to move in the day an old one leaves. Also a bad tenant can empty a whole building before you are able get rid of them. All these costs athough you may only be able to estimate them should be considered as well, plus others that I haven't thought of.
Good luck, you will nedd it when dealing with a rental property.
One other point too. When your money is in the bank it is working for you (although maybe not that hard at these rates... there are some other things like GICs that pay better rates) but when you are a landlord you are going have to do at least some work yourself (how much depends if you hire a management company as suggested above) to get your return and it could be a lot with a lot of headaches as well.