While Canada’s largest banks are charging more to lend money due to high interest rates, experts say they are failing to increase savings account rates in a similar way.
“On the borrowing side, the banks are much quicker to pass that on to consumers,” Natasha Macmillan, the director of everyday banking at Ratehub.ca, told CTVNews.ca. “Unfortunately, however, on the saving side or on the deposit side, they’re less quick to pass that on.”
Aimed at taming inflation, the Bank of Canada began implementing a series of interest rate hikes in March 2022, from a historic low of 0.25 per cent to 4.5 per cent today – the highest it’s been since 2007. With the cost of borrowing money increasing, it makes sense that banks have been quick to charge higher interest rates for mortgages and loans.
“When the Bank of Canada increases its policy rate, it’s increasing the funding cost for banks,” Claire Celerier, an associate professor of finance at the University of Toronto’s Rotman School of Management, told CTVNews.ca. “It’s quite normal for banks to transfer the increase in their funding cost to their loans and mortgage rates.”
But in most cases, banks have not been as quick to increase interest rates for personal savings accounts.
Macmillan from Ratehub, a website that compares financial products like mortgages and credit cards, notes that while savings account interest rates have increased somewhat over the past year, they are being outpaced by borrowing costs.
“It does tend to move at a bit of a slower rate, whereas on the borrowing side, it’s almost same day, next day kind of change, depending on the Bank of Canada announcements,” Macmillan explained.
Flush with cash and posting profits, banks are not aggressively chasing after new deposits, according to Celerier.
“There is no bank advertising higher rates,” Celerier said. “They have a lot of money in their balance sheets following the pandemic.”
Macmillan and Celerier also both think a lack of competition and consumer apathy is keeping Canada’s largest banks from offering more competitive savings account rates.
These banks advertise “high interest” savings accounts with rates between 0.05 per cent at TD Bank and 1.8 per cent at the Bank of Montreal. Others fall between 1.4 and 1.5 per cent – figures that can be more than double at smaller financial institutions, according to Ratehub.ca.
“There are definitely better saving rates in Canada outside of the big five,” Macmillan said, referring to TD Bank, RBC, Scotiabank, BMO and CIBC. “It’s definitely recommended to shop around… as opposed to being stuck with the banks that we’re the most comfortable with or the most aware of.”
The growing discrepancy between borrowing and saving rates has led to stern words and action from officials in countries including Australia, South Korea and New Zealand.
“What we are calling out across the banks is they had been very quick to increase their mortgage lending rates, but deposit rates have lagged behind and bank margins are holding up,” the governor of the Reserve Bank of New Zealand said during a February press conference. “High deposit rates are a critical part to encourage savings, which takes inflation pressure out of the economy.”
Canada’s Department of Finance did not respond to a request for comment.
CANADA’S LARGEST BANKS WEIGH IN
CTVNews.ca reached out to Canada’s six largest banks for explanations. TD Bank, CIBC, BMO and Scotiabank only replied with general statements highlighting products and services such as GICs, which have higher interest rates than most savings accounts.
“The (Bank of Canada) rate is one reference point that RBC uses to set our Prime Rate and interest rates on home equity loans, but it is not the sole driver of RBC’s funding costs,” a Royal Bank of Canada spokesperson told CTVNews.ca. “When considering changes to our prime rate and interest rates on deposits and home equity loans, we weigh a number of factors, including the competitive environment, risk exposure, our responsibility to clients and shareholders and our funding and regulatory costs.”
CTVNews.ca also received a response from the National Bank, which is Canada’s sixth largest bank.
“Rates for borrowing are notably pegged to the Bank of Canada policy rate that has been raised several times in the past few months. For that reason, mortgage rates have fluctuated,” a National Bank spokesperson explained. “On the other hand, rates on savings products are affected by a variety of factors, including product infrastructure and management costs as well as the ‘stickiness’ of the funds, in other words, the expected movements of the monies deposited.”
Despite low savings account interest rates, experts think many Canadians will likely stick with their financial institution.
“It’s more just kind of the apathy of, are you comfortable setting up a new bank account or going through the paperwork associated with it,” Macmillan said. “I think we’re at a time that it is definitely worth putting that time and investment forward to ensure that you can maximize your savings.”
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
