“When there is lower competition between banks, then it takes more time for them to adjust rates on deposit accounts.”
Part of what boosted rates in the early 1980s was the introduction of money market mutual funds, providing a competitive alternative to bank accounts for average savers.
Some banks have also started to increase rates, though often via short-term promotions and other restrictions, and it’s not across the board. TD Bank, meanwhile, offers 0.05% interest on balances above $5,000 for its high interest savings account , RBC offers 0.8% for its high interest account, and BMO has a one per cent savings option.
Part of the challenge, though, is that banks are not so desperate for deposits after Canadians have seen savings swell during the pandemic. De Souza noted that credit unions offer higher rates in part because they’re designed to serve members, and not just make a profit for shareholders like banks, but that there is still some hesitation among consumers.
“It comes down to the competitive market. That’s driving the majority of movement, so if rates are going up at the rest of the banks and credit unions out there, then we need to follow suit.”
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