A small but encouraging rate war is being fought over five-year GICs.
EQ Bank is offering 3.52 per cent on a guaranteed investment certificate with a five-year term, just surpassing the 3.5 per cent offered by Oaken Financial. Several other small independent banks are offering rates in the 3.1-per-cent to 3.3-per-cent range, while the big online bank Tangerine offers 3 per cent. Expect more battling over the months ahead on rates for both GICs and savings accounts.
GICs are where the growth is in the personal banking business these days. The latest update from financial industry consulting firm McVay and Associates said total growth in this core banking segment over the previous 12 months was 4.4 per cent, compared with 5.8 per cent for the previous year. “Growth is slowing across all products except term deposits,” the report said.
Novantas looked at what happened to savings accounts during the 2004-06 period of rising rates. During the first cumulative increase of 100 basis points in the Bank of Canada benchmark rate (100 basis points equals one percentage point), personal savings account rates rose by 25 basis points. On the second increase of 100 basis points, savings account rates increased by 39 basis points.
“We do expect things to get more interesting,” said Adel Mamhikoff, managing director in Novantas’ Toronto office. “As the industry moves from the first 100-basis-point increase to the second, more and more of the increase starts to get passed along to the consumer. We see that on both the savings and GIC side.”
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