Canadian CD Rates vs US CD Rates

January 20, 2009 1 Comment »

Today, numerous Canadian lenders matched the Bank of Canada’s interest rate cut. This has been the first time this has occurred in 3 months and will hopefully boost revenue for Canadian banks amid the beginning of our recession.

According to Bloomberg the lenders included Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canada and Bank of Nova Scotia. These banks cut their prime lending rates to 3 percent from 3.5 percent. This now matches the central bank’s 0.50% cut. The article also states that the Bank of Montreal lowered its five-year variable mortgage rate by 50 basis points to 4 percent.

How will this affect domestic and Canadian CD Rates?

It’s too early to say how this may effect Canadian CD rates, but if you compare our domestic CD rates with Canada’s savings and deposit rates, you will see they are currently encountering fairly similar yields. Many CD rates in the US have been free-falling since the FED decided to cut our rate to it’s current range of 0.25-0.50%.

As of this month, you can obtain Canadian bank CD’s yielding between 3.0-4.75% depending on the specific term and deposit amount. The US’s best CD rates yield between 2.0-4.0% depending on those same variables.

[Open a Canadian Foreign Currency CD Here. It's FDIC insured.]

If you’re in the market for a bank CD you may want to lock in a deposit with a higher term (say 3 to 5 years) as rates on long term CDs are still attractive but will likely plummet in the near future. We would recommend applying this strategy to both domestic CDs and Canadian equivalents.

If you’re considering investing in deposit products from a foreign country you may want to check out EverBank as they’re online interface allows customers to make deposits in several different currencies – all of which come with varying rates.

Largest Banks in Canada offering Certificates of Deposit:

  • Royal Bank of Canada based out of Montreal, Canada. The Royal Bank of Canada has 1,338 branches and controls roughly $444 million in deposits.
  • Toronto-Dominion Bank based out of Toronto, Canada. Toronto-Dominion Bank has 1,150 branches and overseas $481 million in deposits.
  • Bank of Nova Scotia based out of Toronto, Canada. The Bank of Nova Scotia has 1,030 branches and controls roughly $396 million in deposits.
  • Bank of Montreal based out of Montreal, Canada. The Bank of Montreal has 920 branches and controls roughly $302 million in deposits.
  • Canadian Imperial Bank of Commerce based out of Toronto, Canada. The Royal Bank of Canada has 1,100 branches and controls roughly $353 million in deposits.

Outlook for US deposit rates:

Domestic deposit rates from FDIC insured banks within the US will likely continue their decline. We’re expecting them to bottom out sometime in 2010 and remain at rather impressively low levels until the economy makes a recovery. An important economic factor to keep an eye on will be the potential fall of other major currencies such as the Canadian dollar and the Euro.

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  • Tom T.

    Is there an equivalent to credit unions in Canada? If so, I would recommend checking out those instituions for higher savings rates. The five Canadian banks you mentioned are by far the largest in Canada and control most of the consumer banking there. With those few banks there probably isn’t much in the way of competition going on – which would help raise rates and keep them high.