This is going to get more interesting
There will continue to be a public relations campaign by the big banks to justify why they do not match the rate cuts of the Bank of Canada. The government (Finance minister Jim Flaherty) has certainly waded in by saying we have “an open, competitive banking system” and the federal government “does not dictate business decisions” It is true that the overnight rate dictated by the Bank of Canada is only one of many sources of funds for the big banks and as such does not accurately reflect their overall cost of funds, but given the current mood of Canadians especially in Ontario you would think the banks would work with their customers and give some overall relief, after all collectively the top 3 banks made $10 billion in profits.keep an eye on this as it develops
December 16th, 2008 at 10:38 am
Hi Greg,
Interesting and informative post. What about private lenders (lenders other than banks I mean)? Are they more likely to take their lead from the BofC trend-setting rate at this time?
December 17th, 2008 at 7:34 am
Private lenders as a rule do not look at the trend setting rate. They technically use supply and demand for their funds dictate what the rate and fees will be. On that note I can tell you that private money is expensive and will likely continue to be for some time. The supply is very tight as private investors are holding on to their cash more then ever, and the demand has increased as institutions have left the sub-prime space.