Interest rates have skyrocketed. So why hasn’t the rate on your savings account budged?
As anyone with a mortgage can attest, the cost to borrow money has gotten a lot more expensive this year. Banks were swift to pass on the rate hikes the Bank of Canada implemented as part of its aggressive campaign to tame inflation.
Variable rate home loans routinely top five per cent right now, more than twice what they were a year ago.
But the same can’t be said of savings accounts, which are not paying out much more today than they were a year ago, when the Bank of Canada’s lending rate was 0.25 per cent — its lowest level on record.
Canada’s five biggest banks offer a basic savings account with a rate paying between 0.01 and 0.035 per cent at the moment. So, if you are saving $1,000 for a year, you could earn a grand total of 10 to 35 cents in interest.
Even their so-called high-interest savings accounts that come with minimum balances and other stipulations all pay less than two per cent on an annualized basis.
CBC News reached out to Royal Bank, TD Bank, CIBC, Scotiabank and the Bank of Montreal this week, asking for an explanation as to why savings account rates seem to be slow to rise while lending rates do not, and all the responses were versions of a similar theme: that their rates are based on a variety of funding costs, and while rates on savings accounts are competitive, customers can often get higher rates with products such as GICs that lock in their money for a longer term.
Natasha Macmillan, director of everyday banking with rate comparison website Ratehub.ca, says consumers are keenly aware of that gap between what’s happening to the rates on what they owe versus what they have to save.
“As soon as the Bank of Canada raises their interest rate, we see that being translated immediately on the borrowing side,” she told CBC News in an interview. “But it does take a little bit slower for it to be translated to the high-interest saving side — not quite as quickly [and] not quite at the same rate.”
It didn’t used to be that way. While there’s almost always a gap between what banks charge to borrow money versus what they offer to savers, the spread is more in favour of the banks today than it’s ever been.
In 1981, when Canada’s inflation rate peaked at more than 12 per cent, savings accounts were paying out 19 per cent interest. As recently as 1990, inflation was roughly five per cent, and savings accounts were paying out almost twice that.
That’s not happening today, and there are a few reasons why, says Claire Celerier, a professor of finance at the Rotman School of Business at the University of Toronto.
The first one is that the banks have a lot of deposits on their balance sheet; in their quarterly earnings being released this week, the big banks reveal that they have hundreds of billions of dollars of consumer deposits on their books.
While banks are subject to higher borrowing costs themselves, customer deposits make up about two-thirds of their funding source. Right now, with plenty of deposits to satisfy their needs, they have very little incentive to try to convince people to give them more.
“They have deposits, so they are not stressed about having access to more funds,” said Celerier. “And the mortgage market is slowing down so they don’t need more funds to fund more mortgages.”
But the biggest reason why savings account rates aren’t going up as fast or as high as many savers would like boils down to consumer complacency — or what economists like Celerier call the “stickiness” of the market: a reluctance to leave.
Canada’s five biggest banks control the vast majority of banking services in Canada, and while the stability of Canada’s banking sector is often lauded, at the consumer level a relative lack of competition has its downsides.
Most Canadians prefer to keep their money in a bank they know and trust and that offers them other services, so many don’t bother shopping around for higher interest rates, she says. “That has some costs, directly paid by the consumers, which is that mortgage rates might be higher than in other markets, and the rates on deposit accounts might be relatively lower.”
Lack of choices
CBC News witnessed that consumer apathy the streets of Toronto this week, asking Canadians for their take on their humble savings accounts.
“I haven’t really ever thought about it, I’ve just assumed that’s the way that it is,” Kumbo Mwanangonze said of the meagre rate he gets on his savings account. “I’ve never really looked at my savings account as a way to generate additional money.
“I don’t think that it’s fair if you stop to think about it, but the reality is that I don’t stop to think about it — the amount of interest that you could possibly generate from a savings account, I just don’t think it’s enough to even worry about.”
While he didn’t think it seemed fair for banks to keep savings account rates low even as they raise borrowing rates, Josh Chan says consumers like him deserve some of the blame for being complacent, but ultimately “there’s not enough competition for just savings in general. I think it’s not a monopoly but there’s definitely … just not enough choices.”
Jennie Darnley used to work at one of the big banks, a job that she says gave her a front row seat at how good they are at making it hard for customers to switch. “They make it really challenging, which it’s kind of crazy,” she said. “You’re supposed to invest your most precious assets in these banks and trust them, but I don’t really know if they have people’s best interests in mind.”
It may be inconvenient, but MacMillan with Ratehub.ca says it pays to shop around. She says there are high interest savings accounts at credit unions and online-only banks paying out two, three and even four per cent with few strings attached, in some cases, but you have to be willing to hunt for them.
“We definitely recommend people shop around and switch over to … new accounts as they find better rates,” she said. “Some of the [smaller] banks or the credit unions that can offer those better rates than we’re seeing at the big banks.”
Ultimately, Celerier says the onus is on consumers to seek out better deals where they can, because the status quo is just fine for the banks. “Banks are making profits by not passing on the higher interest rates,” she said.
“When the level of interest rates at a savings account is lower than inflation, people are losing money and savings are basically melting away,” she said. “Real returns on savings are negative.”
A Game-Changing Factor to Job Search: Your Ability to Make Human Connections
This column will be a departure from my usual job-searching topics to focus on something crucial to a successful job search and your career momentum, especially when networking and interviewing: making human connections.
“The most important things in life are the connections you make with others.” – Tom Ford, American fashion designer.
Genuine human connections lead to positive energy exchange and trust building. Since most job search activities involve interacting with people, projecting positive energy and being seen as trustworthy greatly benefits you.
According to American psychologist Abraham Maslow’s Hierarchy of Needs, love and belonging are the most essential needs we must fulfill, besides food, water, and safety. We are more fulfilled when our needs for love and belonging are met.
We live busy lives, juggling work, family responsibilities, self-care, side hustles, and more. Therefore, often our social connections fall by the wayside. You might not think connecting with others is important, but it is. Social connections can lower anxiety and depression, help regulate emotions, increase self-esteem and empathy, and improve your immune system. These are huge pluses when job hunting.
Sadly, we live in a time when there is a great deal of disconnection. While technology gives the appearance we are more connected than ever, the screens around us disconnect us from nature, ourselves, and those around us. Rather than using technology, especially social media, to enhance our human connections, we use it to replace them.
Being brave, proactive, and taking chances is often required to make human connections. Striking up a conversation with a stranger can be intimidating, requiring you to step out of your comfort zone. Your lowest-hanging fruit is to reconnect with current friends and family. Then venture out and try new activities, such as joining a club or taking classes, to meet people to build a relationship with.
Putting yourself out there will ultimately pay off in the form of a rewarding feeling that comes from building human connections. Here are six simple ways you can create human connections.
Surround yourself with people with shared interests.
It is easy to bond with people who share your interests and hobbies. Identifying commonalities between your interviewer and yourself is the most straightforward way to bond with your interviewer, which will give you a competitive advantage.
Do you love reading? Join a local book club. Are you a runner? Join a running club. Go where people who share your interests and beliefs are, such as clubs, volunteering, sports, taking classes, church, or sitting on an advisory board.
Overcome your resistance.
Building relationships is often intimidating because of a natural fear of rejection. However, to make human connections, you must overcome your limiting beliefs causing your resistance to change, and embrace situations outside your comfort zone.
The best way I know how to lower your anxiety when meeting new people is to remember showing interest is a massive gesture to anyone you meet. Therefore ask open-ended questions about the other person and make your discussion all about them.
TIP: When meeting someone for the first time, ask yourself, “How can I help this person?”
Smile and give off a positive attitude.
People prefer positive emotions to negative ones when forming a social connection; therefore, first impressions count.
A positive demeanor and a genuine smile will naturally draw people to you. Before spending time with others, I find doing a gratitude exercise and taking a few minutes to reflect on the good things in my life helpful in creating a positive attitude.
Putting your best self forward will maximize your chances of being a people magnet.
If you want to make friends more easily, allow yourself to be more vulnerable with others. This does not mean dropping all filters or boundaries. Too much, too soon, can put people off. On the other hand, you do not want to be an overly edited version of yourself and thus come across as not being authentic.
People can sense whether or not someone is genuine, so let them see the most authentic version of you. Your vulnerability will also prompt them to feel comfortable around you and connect with you on a deeper level.
Do not hide behind your phone.
In social situations where you are uncomfortable, hiding behind your phone is easy, preventing you from making real-life connections.
Being on your phone during a party or networking event makes you less approachable. Whenever you are out, focus on being present and engaging with the people around you.
Stay in touch.
Human connections need to be nurtured. Regular contact deepens your connections.
If you make a new friend, keep in touch with them and grow your friendship. Likewise, maintain your existing relationships with friends, family, and colleagues by keeping in touch.
Making and maintaining human connections is an activity you should prioritize if for no other reason than the fact that opportunities (e.g., jobs, friendships, love) exist all around you; the only caveat is they are connected to people. Therefore, the more people you are connected to, the more opportunities you will be exposed to.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to email@example.com.
First Citizens acquires troubled Silicon Valley Bank – CP24
North Carolina-based First Citizens will buy Silicon Valley Bank, the tech industry-focused financial institution that collapsed earlier this month, rattling the banking industry and sending shockwaves around the world.
The deal could reassure investors at a time of shaken confidence in banks, though the Federal Deposit Insurance Corp. and other regulators had already taken extraordinary steps to head off a wider banking crisis by guaranteeing that depositors in SVB and another failed U.S. bank would be able to access all of their money.
Customers of SVB will automatically become customers of First Citizens, which is headquartered in Raleigh. The 17 former branches of SVB will open as First Citizens branches Monday, the FDIC said.
European shares opened higher Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%.
Investors worry that other banks also may crumble under the pressure of higher interest rates. On Friday, much of the focus was on Deutsche Bank, whose stock tumbled 8.5% in Germany, though it was back up about 3.6% in early trading Monday. Earlier this month, shares of and faith in Swiss bank Credit Suisse fell so much that regulators brokered a takeover of by rival UBS.
In the U.S., SVB, based in Santa Clara, California, collapsed March 10 after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-largest bank collapse in U.S. history after the 2008 failure of Washington Mutual. Two days later, New York-based Signature Bank was seized by regulators in the third-largest bank failure in the U.S.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000, so depositors were able to access their money.
New York Community Bank agreed to buy a significant chunk of Signature Bank in a $2.7 billion deal a week ago, but the search for a buyer for SVB took longer.
The sale announced late Sunday involves the sale of all deposits and loans of SVB to First-Citizens Bank and Trust Co., the FDIC said.
The acquisition gives the FDIC shares in First Citizens worth $500 million. Both the FDIC and First Citizens will share in losses and the potential recovery on loans included in a loss-share agreement, the FDIC said.
First Citizens Bank was founded in 1898 and says it has more than $100 billion in total assets, with more than 500 branches in 21 states as well as a nationwide bank. It reported net profit of $243 million in the last quarter. It is one of the top 20 U.S. banks and says it is the largest family-controlled bank in the country.
Shoppers Drug Mart moves away from medical cannabis, will send patients to Avicanna – CTV News
Shoppers Drug Mart Inc. is moving away from its medical cannabis distribution business and preparing to transfer patients to a platform run by biopharmaceutical company Avicanna Inc.
The pharmacy chain owned by Loblaw Companies Ltd. announced the shift Tuesday, but did not say what prompted the change or how much money Toronto-based Avicanna is paying for Shoppers to refer patients to its MyMedi.ca platform.
“We are grateful for the trust placed in us by our medical cannabis patients over the past few years, and are confident we’ve found the right partner in Avicanna to continue to support them,” said Jeff Leger, Shoppers’ president, in a statement.
His company will start to send customers to Avicanna’s platform in early May, with all of the patients set to be off-loaded from Shoppers’ medical pot service by the end of July. Customers will be able to place orders on Shoppers’ website through the transition period.
Avicanna said it will offer a similar range of products including various formats, brands and “competitive pricing.” Like Shoppers, its online medical portal will strive to educate customers around harm reduction and provide specialty services for distinct patient groups like veterans.
Shoppers first launched its medical cannabis business in Ontario in January 2019, months after recreational pot was legalized in Canada (medical pot was legalized in Canada in 2001) at a time when many predicted the weed sector would be booming in the coming years.
The sector has instead struggled with profitability and as high numbers of recreational cannabis shops cluster in several cities, many retailers and licensed producers have had to drop their prices to stay competitive.
However, Shoppers said it racked up tens of thousands of patients in its four years of existence, providing them with access to cannabis from more than 30 brands including Aphria Inc., Hexo Corp.’s Redecan and the Green Organic Dutchman.
Shoppers’ medical cannabis patients were required to obtain a prescription from a licensed health care provider such as a doctor to begin ordering pot from the company, which shipped orders to their homes.
But the company was unhappy with how medical pot regulations limited its model. Shoppers claimed Tuesday that medical cannabis remains the only medication that is not dispensed in pharmacies.
“As we move away from medical cannabis distribution, we remain firm in our belief that this medication should be dispensed in pharmacies like all others and will continue our advocacy to that end,” said Leger.
Avicanna’s statement did not outline its feelings on the matters, but its chief executive said it was “motivated” to “put our full efforts toward advancing medical cannabis and its incorporation into the standard of care.”
“We are thankful to be selected as the partner for this transition and look forward to introducing MyMedi.ca, supporting patients and providing them with continuity of care,” said Avicanna chief executive Aras Azadian in a statement.
This report by The Canadian Press was first published March 28, 2023
A Game-Changing Factor to Job Search: Your Ability to Make Human Connections
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