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21 January 2008

I think the Bank’s are getting caught with their faces orange.

The following article reminds me of that TV ad, with Dad sitting a his computer with Cheesies spilled everywhere and asks his son if he knew what happened, and his son with the orange face says no ……

I think the Bank’s are getting caught with their faces orange.

Banks deny collusion on interest rates

Duncan Mavin, Financial Published: Wednesday, January 16, 2008

Executives at Canada's big banks were outraged at suggestions they have held discussions to set interest rates independently of rate-setting decisions from the Bank of Canada.

It is "absolutely not" the case that the banks get together to set rates, said a spokesperson for Bank of Montreal.

"Pricing decisions are proprietary decisions and we don't discuss them in advance," he said.

Privately and publicly, bankers expressed frustration at the suggestion in a media report yesterday that the banks were discussing defying the central bank - which is expected to cut its key interest rate by 25 basis points next week - because their own borrowing costs have risen due to the global credit crunch.

A spokeswoman for Royal Bank of Canada denied strongly that any collusion has taken place. "Canadian banks make competitively driven, independent decisions with respect to the setting of interest rates," said the spokeswoman. "Pricing decisions reflect both economic realities and the Bank of Canada's monetary policy."

A spokesman for Toronto-Dominion Bank said the bank sets rates following its own policies, and "factors in a bunch of things including market conditions and what the Bank of Canada is doing."

"From our point of view, it's a TD decision and not a group decision," he said.

The other big banks declined to comment on the story.

The media report cited a report issued in mid-December from TD, in which the bank's economics department speculated some banks could choose not to reduce the prime rate after a Bank of Canada rate cut.

The TD spokesman said the report from the economics department was "no reflection of corporate policy" and he pointed out that TD has no history of defying the Bank of Canada.

Other industry sources also said the banks are unlikely to act in a way that would be considered a big snub to the Bank of Canada.

Officials at the Bank of Canada were actually pleasantly surprised at how quickly the banks followed the central bank's last rate cut in December, considering tough market conditions, said one very senior ranking bank executive.

Bankers also speculated about the source of the media report which caused a stir on Bay Street. One BMO insider said, "If the pot is being stirred on this, it's not coming from BMO."

Financial Post

Jan 22 2008 is when we will know the truth about who is talking to who….

15 January 2008

Common Sense Ways to Trim Years off Your Mortgage

Shop around! Bank employees are paid to protect the bank, and getting the right mortgage from them usually involves playing games. Why waste your time? Getting a good interest rate is crucial, but don’t forget, flexibility and options are also important. Talk to a mortgage professional who can give you impartial advice and is not tied to any one specific lender.

Whether applying for a credit card, personal loan, or a mortgage all creditors will want to review your credit history. The best thing you can do is to avoid consumer debt as much as possible, always pay your bills on time, and the less you inquire for credit the better. Visit to get a free copy of your credit report no strings attached. Your credit history can affect more aspects of your life than you think.

By matching the frequency of your mortgage payments with the frequency of your pay periods, not only is it easier to budget and monitor your cash flow, you’ll shave years off your amortization. Bi-weekly payments, for example, means you’ll make 26 payments in a year, equal to 13 monthly payments instead of 12. It’s this “accelerated” pace of repayment that allows you to repay your principal quicker, saving you money in interest.

For some homebuyers with budgeting room, see what your payments would be with a 20-year amortization instead of 25 years. In return for slightly higher payments, you could shave 5 years off your amortization, build equity in your home quicker, and be well on the road to being mortgage-free sooner. For existing homeowners who are now renewing mortgages at much lower interest rates, instead of taking the lower payment, keep the payments the same or make them higher, and shorten your amortization.

Many borrowers consider pre-payment privileges an important feature when taking out a mortgage, yet only 3% of consumers actually take advantage of them. The extra payments go directly in your pocket, either by paying less interest, building equity more quickly, or being mortgage-free sooner. Every dollar you pay over and above your regular mortgage payment goes directly to principal. That means that whenever possible, a few hundred dollars here and there can quickly add up to a few thousand saved later on.

While it varies with each lender, most financial institutions will allow a lump sum prepayment up to a maximum of 20% of the original mortgage amount in any one calendar year. This privilege is usually not cumulative so if you don’t use it, you lose it – you can’t carry them forward. Most people make the mistake of thinking all or nothing. If they can’t come up with a substantial prepayment they don’t bother at all. Even small extra payments could pay big dividends later on. Income tax refunds (or any portion of) are tailor-made for extra payments of principal on a mortgage.

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