How to make the most of rising interest rates

As you may have heard, back in September the Bank of Canada once again raised interest rates. We were asked by a viewer if that should also mean a bump to interest earned on savings accounts. Not always, experts say.

Toronto resident Debbie O’Kane stays on top of her finances, but one thing she admittedly hasn’t done recently is check her savings accounts.

“I know how much should be in there but I haven’t checked in awhile,” she said.

O’Kane said she would expect an interest rate hike to her savings account.

“When the Bank of Canada raises interest rates, I think automatically our rates should go up too on savings.”

Maybe — or maybe not — says Sun Life Financial business development partner Jennifer O’Heron.

“When the Bank of Canada hikes interest rates, the banks do not necessarily have to increase the short-term and long-term savings rates,” she said.

There’s no legislation that requires banks to do so, but “due to competition pressure, most of them eventually would have to,” O’Heron said.

She recommends consumers check their accounts. If you don’t see the rate increase, call someone.

“Figure out a way to contact your financial institution. They should be able to tell you exactly what interest rate you are getting. And if you are unhappy about it, do your research and negotiate.”

The Bank of Canada has signaled interest rates may rise again to combat high inflation. September’s rate increase is showing the hikes are slowly working.

“Inflation has come down. But for the inflation to come down to two or three percent, which is the target, I think it’s going to take time,” O’Heron said.

This is bad news if you want to borrow money soon.

“That’s why I would strongly suggest Canadians be prepared,” O’Heron said.

“But — keep in mind — when you’re looking at the interest rates from a historical perspective, we’re still in a relatively low interest environment.”

As for savings, customers like O’Kane have some power. She already has a plan if she doesn’t see her interest rate increase.

“Then I will go to the bank across the street if they haven’t gone up.”

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