Bank of Canada cuts key rate by 0.25%

[Jbo]

http://www.therecord.com/news-story/...fall-advisers/

A pretty good read

[robaur]

Originally Posted by Jbo

I don't work for TD, but you sure seem to have a bone to pick with the Banking industry.

I'm not sure what line of work you are in, but I will say Banks are in the business to make money. We have shareholders that demand profitability.

None of this has to do with BoC cutting the overnight rate, but you seem angry at a more fundamental level. I'm just curious are banks supposed to operate at a loss or breakeven level? How long do you think that would last? If you want to be more of a member and share in all that, there are credit unions you may find more to your liking. But then you are probably going to want them to be profitable right?

This post is not to defend from a soapbox, but I could throw stuff back at you. Are you equally as outraged that airlines haven't dropped flight prices despite lower fuel costs?

Actually I am very closely involved with the same industry that I am bashing and even have investments in the major banks....so I am one of those shareholders that demand profitability but not in this dog piss manner. Yes, it is free market and capitalism for banks to try and be the most profitable. But this isn't the way to do it.

Central banks set fiscal policies based on the broad market environment and in this age, the global market environment. The financial institutions that are under their jurisdiction have an ethical obligation to the Bank of Canada to follow the rate cuts and rises.

This is no different than the middleman committing a robbery. Like I said, I'm very much involved in the banking and finance industry, but I believe that his stance by the banks is a complete farce and in direct violation of what the Bank of Canada is trying to accomplish.

The Bank of Canada didn't cut the rate to boost the profitability of the banks....they cut the rate to soften the blow of the plunging Oil price on the broader Canadian economy.

I don't have a bone to pick with anyone or the banking industry...I just cut the crap and talk straight facts.

I'm guessing you're a mortgage broker? So you're an expert in this field more or less:

If you can justify the position that the Bank of Canada cut the rate to help boost bank earnings then I'm all ears.

[Tinordi]

Originally Posted by Red

Your best bet is to HELOC your current residence and with those proceeds buy a condo as an investment. There was never a better time to buy, inventory is up 100% percent (yup, that is one.hundred.percent) and sales are way down so not only do you have a great selection, but you can also take your time to choose as everyone else is out there doing stupid things like paying off their debts instead of buying the new great condo in east village.

Pretty sure the BOC had to lower the interest rate because people just don't have enough debts. We need to support this PC government by holding this economy together for just a little bit longer. Say, next elections?
And what better way to boost the TSX but borrow money and buy in at these bargain prices. The TSX has never been this low, you'd be stupid to pass that opportunity. Buy now before you are priced out, the overall economy is great as seen by this morning's announcement so it's noting but up, up , up.

Where's that green text?

Laugh, you actually had me for a second there.

Goes to show just how lubed up everyone is on real estate mania and discussion in all corners of media and the office.

[Slava]

There we go: TD cut rates on its investment savings by 1/4 point, and of course they already announced they wouldn't be reducing the rate for borrowers. What a joke.

[blankall]

Originally Posted by Slava

There we go: TD cut rates on its investment savings by 1/4 point, and of course they already announced they wouldn't be reducing the rate for borrowers. What a joke.

Borrowing rates are based on competition. Rates aren't usually cut immediately. Typically one of the smaller lenders will cut first, then the big guys do it to stay competitive.

[Jbo]

Originally Posted by robaur

Actually I am very closely involved with the same industry that I am bashing and even have investments in the major banks....so I am one of those shareholders that demand profitability but not in this dog piss manner. Yes, it is free market and capitalism for banks to try and be the most profitable. But this isn't the way to do it.

Central banks set fiscal policies based on the broad market environment and in this age, the global market environment. The financial institutions that are under their jurisdiction have an ethical obligation to the Bank of Canada to follow the rate cuts and rises.

This is no different than the middleman committing a robbery. Like I said, I'm very much involved in the banking and finance industry, but I believe that his stance by the banks is a complete farce and in direct violation of what the Bank of Canada is trying to accomplish.

The Bank of Canada didn't cut the rate to boost the profitability of the banks....they cut the rate to soften the blow of the plunging Oil price on the broader Canadian economy.

I don't have a bone to pick with anyone or the banking industry...I just cut the crap and talk straight facts.

I'm guessing you're a mortgage broker? So you're an expert in this field more or less:

If you can justify the position that the Bank of Canada cut the rate to help boost bank earnings then I'm all ears.

I'm actually the farthest thing from a mortgage broker. I'm involved in International Commercial Lending. I'm not here to argue or justify anything.

It was a surprising move by the BoC. Most economists I have listened to suggested that we would finally see small increases in interest rates in 2015. (This was pre-oil crash) The measure to soften oil prices dropping was to decrease already historically low rates, when household consumer debt is at its highest? It could be argued that it did do a great job of decreasing the value of the CAD dollar. Which in turn will help exporters and manufacturing sector, as well as keep household market high, as people will continue to overleverage.

[Jbo]

Originally Posted by blankall

Borrowing rates are based on competition. Rates aren't usually cut immediately. Typically one of the smaller lenders will cut first, then the big guys do it to stay competitive.

This.

[Slava]

Originally Posted by blankall

Borrowing rates are based on competition. Rates aren't usually cut immediately. Typically one of the smaller lenders will cut first, then the big guys do it to stay competitive.

The whole point of a variable rate product is to have it move with prime though. You take the risk that if rates rise that you will pay more, and get the reward that when rates fall that you pay less. Mortgage rates are different because they're based on bonds, but this is a different case.

[MillerTime GFG]

IMO, we're going to start to see some movement as we get closer to the spring market. It's going to be interesting to see what some of the smaller lenders are going to do; the ones that are Western Canada only, where Calgary is a huge portion of their volume. 2015 has already shown signs of stagnant inventory.

[kevman]

Originally Posted by Slava

The whole point of a variable rate product is to have it move with prime though. You take the risk that if rates rise that you will pay more, and get the reward that when rates fall that you pay less. Mortgage rates are different because they're based on bonds, but this is a different case.

This. I, foolishly apparently, thought that bank prime moved with BOC prime. I took on extra risk with a variable mortgage under the assumption that if rates went up my interest would go up but if rates went down my interest would go down. Boy was I mistaken...

To be honest it's more the matter of principle...

[codfather]

I worked for one of the major banks during the last recession in 2008 and 2009. The BoC was dropping rates by half to a quarter point almost every time they met and the big four were following along, keeping their prime rate in step, despite plunging profits at the time (largely due to their investments in the US sub-prime mess). At one point the BoC dropped prime another quarter percent and TD was the first to announce they would NOT be following this time. It was big news then, especially given that TD had just reported profits were 98% for the same period the year prior (compared to the other three which had all reported considerably lower profits but still dropped their prime rates, though only by 0.15% at first then the other 0.1% after public and BoC outrage). TD eventually did capitulate and dropped their rate, but it stuck with me that TD just seemed so much greedier than the rest, which is saying something.

I have the same sentiment though, the BoC didn't drop rates to increase bank profits. Looking at the last release from Dec. 2014, TD reported a 3% increase in profits from the same period last year ($1.81 billion to $1.86 billion), though apparently that was not up to analysts predictions. I have a feeling the banks will follow along but they're all going to try to get as much as they can.

[MillerTime GFG]

Originally Posted by codfather

TD eventually did capitulate and dropped their rate, but it stuck with me that TD just seemed so much greedier than the rest, which is saying something.

They seem to be greedy in more ways than one...see 'collateral mortgages'.

[MillerTime GFG]

Originally Posted by kevman

This. I, foolishly apparently, thought that bank prime moved with BOC prime. I took on extra risk with a variable mortgage under the assumption that if rates went up my interest would go up but if rates went down my interest would go down. Boy was I mistaken...

To be honest it's more the matter of principle...

If you're speaking of recently, you're still way ahead of the game vs. fixed rates though!

[blankall]

Originally Posted by Slava

The whole point of a variable rate product is to have it move with prime though. You take the risk that if rates rise that you will pay more, and get the reward that when rates fall that you pay less. Mortgage rates are different because they're based on bonds, but this is a different case.

I agree.

If the rates stay down I expect to see a change in lending rates. Just don't expect to see any banks rushing to make that change.

Another issue is the sub prime mortgages that are rampant. I'm at prime -.9. Quite frankly the banks are not making much profit from me. That rate was given on the assumption rates would rise, which they didn't. So in reality, I'm making money from the while situation and the rate dropping is just fing over the banks.

[MillerTime GFG]

Originally Posted by blankall

I agree.

Another issue is the sub prime mortgages that are rampant. I'm at prime -.9. Quite frankly the banks are not making much profit from me. That rate was given on the assumption rates would rise, which they didn't. So in reality, I'm making money from the while situation and the rate dropping is just fing over the banks.

Where the heck did you get that from and how? True North Mortgage? I haven't even seen them that low.

[kevman]

I'm also at prime -.9 and I want my sub 2% rate!

Tangerine mortgage from True North...

[MillerTime GFG]

Originally Posted by kevman

I'm also at prime -.9 and I want my sub 2% rate!

Tangerine mortgage from True North...

Ahh yes, that makes sense. Must have got in at the right time, as they're not that low right now.

In regards to your sub 2% comment, Butler Mortgages in Ontario (who has the same model as TNM here) made a quick move after the BoC cut their overnight rate and offered a prime - 1.16%! They've since retracted, but I couldn't believe that.

[blankall]

Originally Posted by MillerTime GFG

Where the heck did you get that from and how? True North Mortgage? I haven't even seen them that low.

3 years ago from CIBC. There was about a year when rates like this were common. I even know one guy who got prime -1%. It was around the time they got rid of 35 year amortizations. The assumption was that rates would also rise as the government was cracking down on lending and mortgages to cool the housing market. That never happened.

I actually rent the place I live in and own a rental property. 35 years and currently at 2.1% interest.

[Hammertime]

Originally Posted by blankall

I agree.

If the rates stay down I expect to see a change in lending rates. Just don't expect to see any banks rushing to make that change.

Another issue is the sub prime mortgages that are rampant. I'm at prime -.9. Quite frankly the banks are not making much profit from me. That rate was given on the assumption rates would rise, which they didn't. So in reality, I'm making money from the while situation and the rate dropping is just fing over the banks.

That's a great rate. Congratulations for some savvy shopping - I'm at Prime-0.65.

I don't want to be "that guy", but sub-prime doesn't mean under prime in the context of mortgages.

Also another thought in the context of the interest rate cut - I'm thinking that the BoC wanted to see the currency devalued sharply to soften the Oil Price plunge rather than a direct impact on consumer borrowing, since oil prices are traded in USD and the Canadian companies operate in CAD. It also has a direct impact to export trade.

[GP_Matt]

Sub prime referred to borrowers who were less than optimal. They received higher rates because they were a higher default risk.