New data from Stats Canada reveals that banks are charging more than ever for their financial products.
The latest Lending Services Price Index (LSPI) shows that the spreads between what the bank can borrow more for (the overnight lending rate) and what they are actually charging customers has surged in recent years.
In fact, businesses are being charged 46% more than they were in Q1 2017.
The spread for individuals hasn’t increased as much, sitting at a 17% increase since 2017.
While its no surprise that borrowing has become more expensive, its important to remember that this price index is on top of prevailing interest rates — its “the cut” the bank takes.
Stats Canada defines the LSPI as “a monthly price changes over time for existing lending services in Canada; the estimates are produced on a quarterly basis. Prices are derived as the difference between annual percentage rates for existing loan products and weighted averages of yields on financial market instruments”
Banks often increase their spreads in turbulent economic times to shelter their profits from loan losses and risk.
