I came across an article today that speaks to the increasing frustration all of have with banks. (link below). Despite a downturn in the economy, banks boasted over $19.5 billion in profits for 2007 (not income, profits!).
The Bank of Canada has now lowered the lending rate to 1%, the lowest in history.
The CMHC has purchased over 33 billion in mortgages and the government has agreed to take another $75 million off the bank's books.
{Steve Foerster, a professor of finance with the Richard Ivey School of Business at the University of Western Ontario, said many people are basing their frustration on a trend they saw when times were good. While it has traditionally been the case that banks would lower or raise their interest rates based on the Bank of Canada's rate announcements, there is no law that states they must do so. }
Perhaps we need one.
{Terry Campbell, vice-president of policy for the Canadian Bankers Association, says that lending rates would only affect short-term loans. He says bank policy is often misunderstood and that the balancing act between satisfying customers and satisfying stakeholders is a difficult one to maintain.}
Maybe the government could alleviate their difficulties by creating some new guidelines (i.e. legislation) that would eliminate their need to be all things to all people and allow them to concentrate on solving problems for the common man instead of balancing everything they do against maintaining continually increasing profitability.
{As of last week, posted rates for a five-year-fixed mortgage (the most popular among Canadian households) from Canada's four biggest banks were 6.75 per cent. In January 2004, when both the Bank of Canada and the bank's prime rate were much higher, that same mortgage was being offered at 6.35 per cent.}
Liberal Senator Pierrette Ringuette, a member of the standing Senate committee on banking, trade and commerce says "I believe that government intervention is needed... There is absolutely no logic to this situation at all." Is anyone listening?
http://www.ottawacitizen.com/Business/Give+break+Canadians+tell+banks/1192115/story.html
At press time, this article was just released featuring the actual text of the Bank of Canada's Jan. 20th policy announcement. But it's the blog comments after that fuel the fire.
Robert J. Morrow is editor of www.HamiltonHomeReview.com, an online real estate magazine serving Greater Hamilton, Ontario. Click here for a FREE SUBSCRIPTION sent to your email monthly. Click here to receive new Hamilton area listings in your email daily.
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