The Bank of Canada announced a 1/2 point drop yesterday of one of their key rates to 2 1/2%, and made the statement:
Bank of Canada lowers overnight rate target by 1/2 percentage point to 2 1/2 per cent
The Bank of Canada today announced that it is lowering its target for the overnight rate by 1/2 percentage point to 2 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 3/4 per cent.
Usually, I would be dancing in the streets and celebrating (the way I was yesterday for the Canadian Personal Finance 1000th Post); however, sometimes things are not as they seem to be at first blush, at least from one bank.
Toronto Dominion: When is Prime Not Prime?
That is actually an excellent question for Michael James, as he is a Pure Mathematician who revels in all things to do with Prime Numbers, however, in this instance Prime means, Prime Lending Rate.
As of two days ago TD (my current bank of choice) had their Prime lending rate (for only their best clients and least risky loans) pegged at 4.75% and their Variable Rate mortgages (at least some) were available at that very rate. Yesterday an odd announcement and change was made that these loans are actually now at Prime + 1%, or 5.75%, thus bumping up the rate for all of these mortgages almost an entire point (and adding much more to monthly payments).
I on the other hand use a secured line of credit which allegedly is at the TD Prime Lending rate of 4.75% as of two days ago. Today, I have seen no change in that rate either up or down, which worries me.
- The rate should drop 1/2% in reaction to the Bank of Canada rate drop, but it might not
- The rate might go up 1% as has happened with the Mortgages to reflect the banks concern about liquidity and credit.
- The rate might only go up 1/2% as a combination of (1) and (2)
- None of the Above and the rate simply does not change, thus the bank pockets 1/2% increase.
What will really happen? I have no idea, but I am curious to see what TD/Canada Trust does for me in specific.
It’s The Economy Stupid
No reactions to my grandiose statement of Tuesday that this is now the only election issue, so I will state it again.
- The environment does not matter
- Cribbed prose from other politicians does not matter
- Petty local bickering about funding to obtuse local or provincial programs do not matter
- Whether Jack Layton sounds petty, Stephen Harper’s sweaters look silly or Gilles Ducepe never mentions sovereignty does not matter.
Thanks for the 1000th Posting
Yup, it was the biggest reading day for my blog in months, and I am not really sure why. Thanks to all my old and new readers, you invigorated an old crusty financial blogger with your reading habits.
Interest Rates in 2008
- January 2009 rates were at 1%, money was effectively free.
- October 2008 rates continued to fall, but did we plan accordingly? No, we spent more.
- September 2008 the rates again remained unchanged.
- July 2008 and the rates remained the same.
- June 2008 the rate was 2.75% overnight. Seemed low even then.
- April 2008 another massive rate cut, where could this all lead?
- March 2008 the rates just kept falling, I wonder why?
- December 2007 is when the Christmas presents, like interest rates, kept falling.
My TD HELOC shows 4.75% today still
They better drop it soon
And the funny thing is the Canadian Banks have been rated tops in the world, and now they are figuring out how to make more money during times of crisis, good for them… except that it’s my money, better go buy more bank stock!
Banks are not likely to pass the entire rate cut on to their customers. By allowing the spread between their borrowing costs and their revenue from customers to grow, they can make some extra badly-needed cash.