Posted by: MonsterMortgage.ca
Prognosticators wondered whether write-downs and losses from a historical down-cycle in oil would damper the Banks’ latest quarterly profits; however, Canada’s largest banks still managed to surpass Bay Street expectations for earnings.
With increased oversight from government bodies and ever-tightening lending rules & standards, Canada’s largest banks still manage to make billions in profits each quarter off of the interest paid by Canadians (among other things) on their mortgages and other lending products.
Those keenly following interest rates may recall that in July 2015, the Bank of Canada announced their decision to lower the overnight lending rate, a key influencer of mortgage rates, to 0.50% from 0.75%. However, Canada’s largest banks, which typically match any decreases in the overnight lending rate, only decreased their Prime lending rates by 0.15%, creating a greater spread on the interest and essentially handing themselves larger profit margins.
Do not be fooled, even with record low mortgage rates, each year Canada’s big banks will still continue to make billions in profits off of mortgages held by Canadian homeowners.
Here are each bank’s earnings for the third quarter of 2016:
- $2.895 billion for RBC
- $2.4 billion for TD
- $1.959 billion for BNS
- $1.441 billion for CIBC
- $1.245 billion for BMO
Canada’s largest banks play a very crucial role in the ongoing operation of the Canadian economy. When it comes to mortgage products, the offerings provided by the big banks leave a lot to be desired. Collateral charges, punishing penalties and posted rates make most bank mortgages less than savoury.
Posted rates, interest rates which no one actually pays, exist solely to inflate the cost of penalties should Canadians choose to break their existing mortgage for a better deal elsewhere.The collateral charge is a clause in many of the Bank’s mortgage contracts where bringing your business elsewhere upon the renewal of your mortgage will require the services of a lawyer – costing you legal fees and hundreds of dollars. While inflated mortgage rates, which require you to negotiate against your own bank, add an additional barrier from the most competitive mortgage rate. The fact is that Canadian homeowners have very little knowledge of these three tiny details. Unfortunately, these three tiny details can also add up costing you thousands of dollars when you least expect it.
And to no surprise, the thousands of dollars made from fine print can often add up to billions of dollars in profits.