Wow – it’s only Wednesday and what a week it’s been in the financial markets.
Monday the world markets dropped enough to wipe out $5 trillion in wealth while the US markets were closed and Tuesday morning the US Federal Reserve dropped rates three quarters of a point.
Here in Canada they came down a quarter of a point that the banks did pass on, but there had been rumours that the no service mega banks were considering not lowering the prime rate.
While it was only a rumor that started back in December, there is no way to buy this kind of bad publicity is there? And how great that a number of media outlets, starting with columnist Greg Weston, brought this to the attention of the world.
The logic was that banks wouldn’t pass on the one-quarter point rate reduction to offset some of their rising expenses and that would include the billions of dollars some of them have lost in their subprime mortgage portfolio.
When the prime rate changes, it affects two-thirds of our borrowing costs, either directly or indirectly, for consumers and businesses. A lower rate is the Bank of Canada wanting to impact the economy, manufacturing, consumer spending and the dollar.
How dare the banks consider not moving down the prime at the same time? Isn’t it enough to keep charging us more and more interest, less and less competition and more service charges everywhere? Am I just cynical or are we supposed to cover some of their paper losses?
Just having this idea floated is another big reason to allow more competition in the banking field. In the U.S. there are about 3,000 financial institutions waking up each morning figuring out ways to bankrupt each other – that’s competition. Not the five we’ve got who want to merge into two or three.
But there’s good news in hearing banks might not change the rates. Because when we get mad – we get moving and there are alternatives for your financial needs:
For savings: ING right now is at 3.75%
For loans & mortgages: Credit unions are at or below the mega no service banks’ rates, are locally owned and run AND you’re a shareholder so you’ll get a large refund at the end of the year.
For RRSPs: Mine are with Primerica Financial. Many of their mutual funds have way better returns – and there are lots of other no-load no fee places to comparison shop.
Maybe this is another reminder to get informed because knowledge really is power and to remember to always always comparison shop. There are options and a lot of ways you can save interest and money.