Shopping for a better savings rate? Where to look and what to consider

globalnews.ca:

An interest rate cut from the Bank of Canada earlier this month marked the first signal that borrowing costs are heading down, but experts say the rates Canadians can expect on savings accounts are also at risk.

The central bank’s policy rate, which now stands at 4.75 per cent after a quarter-point cut on June 5, broadly helps set the cost of variable rate borrowing in Canada on key products like mortgages and credit cards.

But it can also affect savings rates that lenders are offering. Banks need capital to operate, which they can get from both earning interest on loans and offering competitive savings rates on their accounts. When interest rates are high and loans are less attractive, lenders might opt to raise their savings rates to attract Canadians’ money.

Shannon Terrell, lead writer and spokesperson at NerdWallet Canada, says that while there’s “a fairly linear relationship” between moves in the Bank of Canada policy rate and rates offered on loans, it’s more of a “mixed bag” on savings products.

In the wake of the central bank’s rate cut, Terrell says some interest rates have come down on some savings accounts and guaranteed investment certificates (GICs) at a few of the major banks in Canada.

But with only a single rate cut so far, and uncertainty about the pace the Bank of Canada will proceed with an expected easing cycle, Terrell says she expects many banks to keep their savings rates higher to remain competitive.

Barry Choi, personal finance expert with Money We Have, also said in an email to Global News that some banks may choose to keep their savings offers elevated despite the rate cut.

“That said, it really comes down to each individual bank as some are offering higher rates than others. The ones with