New 2% High Interest Saving Account-Ally

[Aske001]

+1

There is zero rate risk to the financial institution when they charge you the daily market rate on a loan, or pay you the daily market rate on an investment. As soon as you want to lock in a rate for a fixed term, they have to make a future projection, and there's an extra risk to them. They will charge you a premium for that risk.

If it's a 5-year fixed rate, they will do a projection of what the daily rate is going to cost or return over the next 5 years, and then they will add or subtract the risk premium, which will depend on the length of the projection and the volatility of the market. If your money is locked in for the term, they will count that as less risky, because you can't withdraw it at any time which is more advantageous for you and less for them, but there's still some risk.

In the 5-year GIC case we are talking about here, let's say Ally has calculated that interest rates are likely going to go up over the next 5 years, and their model shows that a daily-interest account would probably return something like 4% on average over those 5 years. But they could be wrong - it could be more or less. So they will guarantee you a 3.6% return if you lock in now. It's a risk to them, but they stand to make a little money on that risk if their projection is correct.

[PTMBAA]

It has nothing to do with teaser rates. GIC's are tied to bond yields. Bonds have been in high demand lately and that drove yields down.

This could become a PR issue for Ally though as many people don't understand this.

I have a MBA in Finance, and know about bond yields. However, I don't buy this bond yield argument as the bond yields have not changed that much in the past couple of weeks (please tell me otherwise).

ING Direct has been offering 3.25% for the past couple of months now...if the bond yeild did change, shouldn't their rate go down in tandem with that of Ally?

[sklm]

You can get 3.75% for a 5 year GIC at People's Trust. http://forums.redflagdeals.com/peopl...-rates-928411/

Well, not anymore... Also down to 3.60%

[chincer]

3.4%

Bond prices are falling like a stone, the 4 year Transalta bond I follow was 3.9% a few weeks ago. It's now 3.2%.

[thegov]

I have a MBA in Finance, and know about bond yields. However, I don't buy this bond yield argument as the bond yields have not changed that much in the past couple of weeks (please tell me otherwise).

ING Direct has been offering 3.25% for the past couple of months now...if the bond yeild did change, shouldn't their rate go down in tandem with that of Ally?

There is also the "leap-frog" effect. Either due to their marketing cycles or their maturities of internal holdings or to grab money from their competitors, institutions will move their rates higher or lower in relation to other institutions.

For a long period, ING was offering lousy rates (e.g. 1.2% for savings). As of a month or so ago, they significantly started to move themselves up the table. Right now, they are right at the high end at the 2yr mark and close to the top for the 3-5yr. (for your info you can see ING's historical rates at http://www.ingdirect.ca/en/accounts-...alencadgic.jsp).

HomeTrust had their peak several months ago - in May their 1 yr at 2.05% was miles above ING and I believe their 5yr got up to 3.75%.

Ally has consistently held all their rates at the very top of the CDIC savings accounts and GICs (Peoples Trust excepted on the sav accts) since I've been following them.

As the BOC has raised rates at the short end, the ridiculously low savings rates are finally starting to edge up by those who were very low to begin with. As mentioned, ING was 1.2% until May -- CTire jumped to 1.5% recently followed by ING. Ally has stayed where it was -- they are probably making a little more on their 2% rates than they were previously.

There is absolutely no question that bond yields have dived over the last few months. I bought roughly a 2 year strip about 6-7 weeks ago -- today the yield is almost 1 full percentage point lower -- and that's a 2 year!! Totally agree with chincer on the bond values.

[Frankie3s]

3.4%

Bond prices are falling like a stone, the 4 year Transalta bond I follow was 3.9% a few weeks ago. It's now 3.2%.

Makes me happy to say that I locked in on a 5 year GIC from Outlook Financial at 4% 2 months back. They only offered this rate for a week before it went back down to 3.75%. I guess in competition to Ally's GIC rate.

[Edward_K]

Ally no longer eats the interest if you zero out an account.
http://img827.imageshack.us/img827/609/img0001wi.jpg

[angel_wing0]

Ally no longer eats the interest if you zero out an account.
http://img827.imageshack.us/img827/609/img0001wi.jpg

wow $2 more!

[Jon Lai]

wow $2 more!

I got that too, except my amount was only $1.2x, and they rounded up to $2 :P

And it costs them 59c to mail that letter...

[cadave]

I definitely didn't get that letter and no interest adjustment in my account... it was one of the things that angered me about Ally which prompted me to stop using their HISA. I missed out on about $8 in interest because I transferred the amount out on one of the last days of the month.

[angel_wing0]

I got that too, except my amount was only $1.2x, and they rounded up to $2 :P

And it costs them 59c to mail that letter...

i lol'ed.

[RubberCheese]

I definitely didn't get that letter and no interest adjustment in my account... it was one of the things that angered me about Ally which prompted me to stop using their HISA. I missed out on about $8 in interest because I transferred the amount out on one of the last days of the month.

I know it shouldn't be necessary, but if you had just called, they would've reinstated the interest.

I had this happen about a year ago, and called to ask what happened (I had over $20k parked in the account for most of the month).

Good to see they fixed the "glitch" as they called it!

[taal]

So does anyone think Ally will raise rates anytime soon; The other banks have been catching up to their 2% as of late. It's still one of the best today.

[angel_wing0]

So does anyone think Ally will raise rates anytime soon; The other banks have been catching up to their 2% as of late.

It's still one of the best today.

You already answered your question in a way. So basically, no.

[angel_wing0]

Down to 1.80% now. No raise, actually drop.