Canadians’ savings drip away as deposit interest stays behind inflation
tops eight per cent, anyone with money in the bank is seeing their savings drip away at the fastest rate on record because interest rates for savings accounts, still largely languishing at around one per cent, haven’t kept up.
There are several reasons for the lag, but part of the problem is the concentration of Canada’s banking sector, said Celerier. There are an increasing number of online banks and credit unions with competitive rates. After the Bank of Canada raised its key interest rate by one percentage point in July, Oaken Financial boosted its rate from 1.65 per cent to 2.25 per cent, while Duca credit union increased its rate from 3.1 per cent to 3.25 per cent, said Natasha Macmillan, Ratehub.ca’s director of everyday banking.Canadians however don’t tend to switch banks very often.
TD Bank, meanwhile, offers 0.05 per cent interest on balances above $5,000 for its high interest savings account , RBC offers 0.8 per cent for its high interest account, and BMO has a one per cent savings option.Macmillan said that more people moving to alternative lenders could put more pressure on the big players.
“The banks right now are flush with cash and liquidity, and their deposit levels are still elevated,” said Carl De Souza, senior vice-president of North American financial institutions at DBRS Morningstar. Many credit unions, however, also haven’t raised rates much. Vancity is still offering 0.75 per cent interest on its main accounts since it also doesn’t have a strong need for more deposits, said chief financial officer Clayton Buckingham.Higher customer deposits have helped meet the higher loan demand and buffered the credit union’s need for more funds, but that could change if the market shifts more, said Buckingham.
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Savings are slowly dripping away as deposit interest lags far behind inflationThe savings accounts of Canadians have sprung a leak. Part of what boosted rates in the early 1980s was the introduction of money market mutual funds,…
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Savings are slowly dripping away as deposit interest lags far behind inflation“When there is lower competition between banks, then it takes more time for them to adjust rates on deposit accounts.”
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Savings are slowly dripping away as deposit interest lags far behind inflationThe savings accounts of Canadians have sprung a leak. As inflation tops eight per cent, anyone with money in the bank is seeing their savings drip away at the fastest rate on record because interest rates for savings accounts, still largely languishing at around one per cent, haven't kept up.
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