GICs and Bank of Canada Rate Hike

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milton
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GICs and Bank of Canada Rate Hike

Post by milton »

Day before yesterday best rate on 5yr GIC on BMO Investorline was 2.20%
Today best rate is 2.23%

What a rip considering my HELOC went up the full quarter point. Wouldn't one think the GICs would follow suit?
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bpither
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Re: GICs and Bank of Canada Rate Hike

Post by bpither »

It's no surprise - that's why TD is my largest holding. They are greedy and so am I ... so I maximize what I can while banking with them, paying zero fees, owning zero structured products and by paying $10 per infrequent trade ... not much since 2009. My advice - buy the stock and collect the growing tax efficient dividends.
Last edited by bpither on 13 Jul 2017 14:04, edited 1 time in total.
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IdOp
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Re: GICs and Bank of Canada Rate Hike

Post by IdOp »

That's the way the banks work it. When interest rates are in a downtrend, the deposit rates will lead the way down, and borrowing rates will lag. In an uptrend, it's the deposit rates that lag. This way the banks can squeeze out the most profit by lending based on the funds they borrow. As bank clients we don't like it, as shareholders we do.

So far, rates have gone up a little. We don't know for sure what happens next, but if they keep going up eventually deposit rates will follow.
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Re: GICs and Bank of Canada Rate Hike

Post by Taggart »

Rob Carrick mentioned much the same in his G&M article yesterday:

No exit from saver’s hell

It’s a borrower’s world. Savers just live in it.......

GICs and savings rates will drift higher, but not in the same regimented way as mortgage, loan and line of credit rates. And when GIC rates do move higher, they’ll still lag well behind the inflation rate in many cases.
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Descartes
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Re: GICs and Bank of Canada Rate Hike

Post by Descartes »

Taggart wrote: 13 Jul 2017 14:07 And when GIC rates do move higher, they’ll still lag well behind the inflation rate in many cases.
Let's not exaggerate.

Current rate of inflation: 1.3%
https://tradingeconomics.com/canada/inflation-cpi

GIC rates at Oaken Financial: 2.75% (1 yr) - 3.25% (5 yr)
(as an example)
https://www.oaken.com/gic-rates/
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Re: GICs and Bank of Canada Rate Hike

Post by OhGreatGuru »

For fixed income investors it's a light at the end of what has been a very long tunnel.

For people with debt the light is an on-coming train. :wink:
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Re: GICs and Bank of Canada Rate Hike

Post by milton »

Rob Carrick interviews Brandon Brot & Mary Rygiel on GIC rates today:

https://www.theglobeandmail.com/globe-i ... e35711239/

The article is also available on TDDI exclusive insights for those blocked by the Globe paywall.

They're saying that even though BoC hiked, GIC rates might stay put or even decline in the near term because they were artificially high due to the Home Capital crisis. Home Capital jacked up their rates in May and some of the competition followed. Now that Berkshire is backstopping Home Capital, they can lower their industry leading 3.25% 5yr GIC. If they lower, their competitors might follow. Best rate on BMO Investorline today is 2.3% for 5yr.

Expect the unexpected!
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Re: GICs and Bank of Canada Rate Hike

Post by SQRT »

The Canafian bank margins have declined a lot since the financial crises. Core (chequing account) deposit rates have gone to zero but would have gone lower if it were possible. It is understandable and expected that they will try to regain as much of this margin loss as possible. They do this by increasing loan rates faster than deposit rates. No one should be surprised. Banks are great investments. You can't beat them, so buy them instead.
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