As TD Bank, Scotia Bank, BMO and CIBC increased the interest rate on existing secured and unsecured lines of credit, Royal Bank remained the lone holdout. No longer. Effective January 5, 2010, RBC is increasing the interest rate on existing credit lines by 1%. The bank is sending out letters to clients advising them of changes to credit accounts:

As a financial institution, we borrow from many different sources in order to lend to our clients. Over the past year, given the economic environment, the cost of this borrowing has increased for all banks. While many have already responded with interest rate increases, we delayed increasing our rates for as long as possible. However, high borrowing costs have persisted, making it difficult to maintain our interest rates at current levels.

The best rates available on both new and existing secured lines of credit with all the big banks is now Prime Rate plus 1%.

This article has 48 comments

  1. Yes as a TD SLoC user I was displeased to see this change put in place (especially since they wanted me to then change to a FIXED RATE version of this product). If I had an option I would change to something else, but I feel now the best option I have is to pay off the SLoC quickly and not have to worry about it?

    Funny when I got this SLoC it was a Canada Trust vehicle and I got Prime + 0.25% … How times have changed.

  2. Nice timing on this article. I just found out yesterday that my brother got hit with an extra 1% interest by Royal Bank.

  3. Once one bank raised the rate the rest were sure to follow. I used to be with RBC but I switched after getting married to my wife’s bank. I’m glad that in a few months our Line of credit will be paid off in full

  4. I got my letter yesterday. I wonder if they will send out the reduced by 1% letter when the economy is doing better.

  5. Good! hike the interest rates, Reduced the loans to businesses, tax everything, approve HST, increase inflations!

    Do everything in 2010 and hope it crash in Sept and Oct!

    So the sharks and vultures will rule again and skinned those sheeps alive.

  6. So I got the letter from RBC as well. My question to anyone who may answer this is, how can I get a better rate on my LOC? It’s currently Prime + 3.5% (Inclusive of the 1% increase)

  7. @Adam, you negotiate and give them a threat that you’ll live from them. I’m serious!

    It all depends on your credit score. if you have a high credit score, they’ll probably lower it.

    Make your interest tax deductable!

  8. Any ideas why they would do this? Apart from making more money.

  9. @Supersocco,

    The reason why they have to increase interest rates is because they have to control the hyper inflation that will happen next year! They printed so much money called Bailouts, an EI for the rich! and now a lof of cash are floating around. By increasing interest rates few people will borrow money. No more cheap money as they say.

    We’re just talking about gold yesterday. This is why the gold is where it is right now. A hedge against inflation and government mismanagement of fund.

    Now, they want to impose HST which is the biggest tax grab!

    Right now, Smart sophisticated investors are funneling billions of money transfering from one point to another.

    So Rule no. 1 “He who owns the gold makes the rules”

    Who do you think is the architect of HST????? If your answer is Dalton…*buzzer* that’s a wrong answer. Dalton is a puppet!

    Find the answer!

  10. “I got my letter yesterday. I wonder if they will send out the reduced by 1% letter when the economy is doing better”

    hope you’re kidding, when the economy starts getting better, your rate will start to climb, not reduce…low rates are only low because the state of the economy right now.

  11. Canadian Capitalist

    @Adam: That would be an unsecured line of credit, right? If you have good credit and substantial equity in your home, you could obtain a secured LOC for Prime + 1% pretty much at any of the banks.

    @Jess: At the present time, sustained inflation is a probability, not certainty. Bond markets are pricing in modest inflation and don’t forget deflation is also a threat.

  12. Thanks Canadian Capitalist, Jess,

    It is unsecured. I have a good networth and over 25% equity in my home so I am going to give them a ringy-dingy and see if they can change it over easily…

  13. I’m just curious, but how do you know that the best rates available on secured lines of credit is prime + 1.0%? Do you know what the best rate available on unsecured lines of credit is? And is this information readily available to people who are applying for loans?

    When I switched my student line of credit to a regular unsecured LOC, there didn’t really seem to be any apparent “rules” regarding how the rate would be determined. I had a 20 minute fight with the bank guy, my rate was set at prime + 2, and I was so disgruntled, I decided to never use the line of credit again. Is there a more civilized way these things can be decided?

  14. I too recd rate increase letter from TD Canada however my line of credit was originally done in 1975 and there was no clause to increase interest rate. I fought with them and they backed away from increasing my interest rate which is just prime rate now.

    Today I recd letter from Royal Bank with the same bull sit to increase my interest rate on my Line of credit to prime plus 1%. I know I will have to check my agreement with them. however I am sure I will fight these jerks too,once I read my agreement again signed in 1975.

    Our banks are biggest scum bags of our society and we need to fight them in order to protect our rights.

  15. Canadian Capitalist

    @Chris: I don’t know for sure that Prime + 1% is the best a client can get. But that’s what I have and I’m fairly certain that it is the best I can get. Unsecured Credit Lines tend to be more expensive.

    @FeedUpCanadian: No such luck here. The agreement clearly states RBC can increase the rate whenever they want for whatever reason.

  16. Wow… does this every bug me… how crazy! Especially when you remember that they did not lower their prime rate as much as the Canadian gov’t reduced their rate to the banks. So much for fair and proportional.

  17. News

    I have a secured line of credit with RBC and my rate is being increased by 1% , I believe it is an across the board hike. I got the same standard letter sent to everyone.
    That is a 44.44% increase just to fatten their bottom line and make their stock optons worth something!! ( 2.25 to 3.25% )
    When I called customer service @RBC they could not answer my question . Where are the higher borrowing costs the the bank is incurring ? All GIC’s , savings and chequing acct.’s pay next to nothing for interest so where is this higher rate being charged to banks? This is the lowest interest rate environment in Canadian history but we Canadians should be allowed to participate in it.

    This is now a political issue which should be taken up by our elected officials.
    Sucking an extra percent from all LOC holders will not stimulate the economy but will hinder spending.
    Got to http://www.saynotobanks.com for more insight anf info.

    Ted

  18. So I called RBC and asked about changing over to a secured LOC from my unsecured LOC. (Switch to the RBC Homline product). Right now they are offering it at Prime + 0.5% so 2.75%.

    My only concern is #1 the fee to set it up is $330.00… and #2 I am worried that it will change my existing mortgage contract with them.

    Does anyone have any experience with the Homeline plan that they can share, or offer any insight?

    Thanks!

  19. Al (different Al)

    On the bright side, now they’ll increase the interest rate they pay on savings accounts. Right?

  20. This is just the start, reduce your LOC, or quit, if you are, using your house like a ATM. Look south for that result. If you don’t like it, don’t have a LOC. Buy bank stocks and benefit through dividends.

  21. Ok , I am starting to feel a little better !! RBC has a new LOC plan based on your home equity. It is called the RBC Homeline Plan which will lessen the burden to .5 % increase instead of a full 1% increase over their prime rate of 2.25%.
    As of today I am told this involves a new application etc and a possible fee ( $400.oo) to set up .
    The irony is that my original LOC is secured and based on my home equity – in other words it is a HOMELINE PLan – just that when I applied for this LOC there was no distinct label for this type of credit so it fell under the category of secured line of credit- even though an appraisal of my home was done at application time.

    Ok fellow Canadians , does this sound like a make work project for bank employees. The banks are starting to work and sound like government bureaucrats.
    Why not convert all secured LOC based on home equity to the new plan ( HOMEline Plan ) and move on …..

    Yes, it will feel so good to pay only one half a percent more instead of 1 % more. I feel honoured – half the rip-off and I am sooo happy.
    The bank lies to Canadians about higher borrowing costs and they get away with it.

    Please call your MP ( member of parliament federally )

    To be continued,,,,,,

    Ted

  22. You can get a better interest rate from your bank owned brokerage, than a HELOC to buy stock, so why would you borrow against your house on non-tax deductible interest, let alone tax deductible interest? Suddenly you plan to buy $200,000 of stock and pay that off over 25 years? You’d pay 1.75% more to do that?

    TD Waterhouse charges me 1.75% lower than my LOC on my margin account, I have cash to cover set aside at ING. I never exceed the margin limits and always leave several thousand of dollars as a cushion for market volatility, usually 30% of margin. You will never get a margin call.

    What if the bank just calls the HELOC out of the blue? You better have cash set aside for that eventuallity, becuse it does happen. People lose their jobs and banks get jittery when that happens. They won’t be your friend if they perceive any risk on your part.

    And since the house is not “liquid”, you will pay a premium to borrow against it.

  23. @DR,

    Can you explain further your strategy. The process you did. What do you mean by “better interest rate from your bank owned brokerage”?

    Are you talking about this http://www.tdcanadatrust.com/investmentlending/2for1margined.jsp

    Coz’ we’re planning to do this in just a few weeks.

  24. It is amazing how everyone in the world loves Canadian banks with the exception of Canadians. The reason the canadian economy is 100 X better than anywhere else is because of the banks. The people complaining about the banks might very well have a job right now directly or indirectly beecause of those banks.

  25. Is there a difference between a secured LOC and a LOC setup for RRSP contributions? I opened an “RRSP” LOC roughly 10 years ago with Royal Bank. It’s been dormant since the first use, but the posted rate is showing 2.25% which is prime. The account manager at the time told me I should only use this LOC to help with RRSP contributions, but the software don’t enforce that. It’s an honour system that the borrowed money eventually makes it into RRSP.

  26. I just received the letter from RBC as well about our unsecured LOC rate increasing 1%. I heard from a friend of mine who banks at TD, that after he threatened to move all his business to another bank they waived his interest rate hick. Has anyone tried negotiating with RBC. I tried to speak with my FP about it today but he says everyones is going up even staff. I would be curious to see what they would do if a high net worth client threatened to move all their business to a competitor over 1%. Any thoughts??

  27. I was assured today(dec 1) 2009 that my rate for an LOC secured by my home within RBC ‘s homeline product will be PRIME+ 0.5%

  28. Pingback: RBC Hikes Rates on Secured Lines of Credit | Canadian Capitalist Litigation just to Me

  29. RBC’s SECURED LENDING RATE IS Prime+0.5%, lowest in Canada. They call it a Homeline Plan. It is guaranteed to never go above Prime+0.5%

    • When I signed my HomeLine Plan they told me my rate would never change. Guess what? When I got my “valued client” increase letter, they showed me every section of the agreement that says they can change anything any time.

      You need to add a line to the agreement to ensure the rate never changes. Good luck with that

  30. ScotiabankLine Visa’s internal system is perhaps a little easier to understand:

    “A” clients get prime + 2.99
    “B” clients get prime + 3.99
    “C” clients get prime + 4.99

    Smartly, they advertise the lowest rate on their website.

  31. Sorry, by lowest I mean the highest interest rate with the assumption that most consumers will be in the ‘lowest’ credit score group.

  32. Prime rate with rbc homeline approved mar 2 2010

  33. Ripple, you received Prime Rate on your credit line (interest only) or a variable mortage? Both products are available within the Homeline plan. My rate on my credit line is Prime +.5% but we had an option for an Open Variable mortgage at Prime. Thanks

  34. Right in the middle of the financial crisis, TD was the first to increase HELOC rate to P+1% but only for NEW HELOC. Personally, this is okay and reasonable course of action.

    However, for all existing HELOC, they are forcing P+1% as of Jan 2010. Is this fair? Didn’t we signed a contract with bank and negotiate a rate of what it would be? Bank caused the financial crisis problem, why for all existing client has to suffer for bank’s bad decision?

    Could it be the reason for the bank increase of their rate for existing client is just for a cash grab? Please note, TD & RBC has just posted their quarter-end result, which was higher their expected in the market! Hence, the bank is making money, right? Do they really need to gouge more from people?

    Lets all sign a petition for all existing HELOC owner to show our displease on Canadian’s distasteful action! Who is in?

  35. Chad,

    The contract you signed states the bank can raise rates. I agree that I do not like my rate being raised but the bank didn’t do anything shady but rather you failed to read. As for your comment about the banks getting us into this. Actually the Canadian Banks saved our economic buts compared to what is happening in the US and globally. TD and RBC are the highest credit rated banks in North America and arguably the world which you would know if you read the business section. So while I appreciate you do not like a higher int rate which is the same as me and the rest of the world… You need to understand big picture. Lending at 3.25% is hardly gauging. It is practically free money. If the bank was actually making 3.25% I wouldn’t even call that gauging and we all know they are making no where near 3.25% when they lend at prime + 1.

    Sorry Chad
    You might very well be employed because of the banks you bash

  36. FeedUpCanadian

    Jeff,

    Are you by any chance working for the banks because by tone of your reply it seems you do.

    FYI – No where in the contract does it says” they can raise rate” it just reads “we may change the agreement”.
    Its a big difference. The rates are low now so what happens when rates go up. Do you think the banks will lower their rate back to prime..

    We all know the banks are Crooks and Cry Wolf at every chance they get to increase rates.

  37. Hi FeedUpCanadian

    I myself work in the financial industry, and understand how the bank work quite well.

    Why would the bank want to return the rate back to Prime? If nobody complains about it, they have no incentive to switch back to Prime.

    Furthermore, between a mortgage & variable rate open HELOC is more higher risk for the bank. Hence, they need interest payment.

    Chad

  38. Hi Jeff,

    > As for your comment about the banks getting us into this.
    Yes, you are correct, the Canadian bank didn’t get much into the problem. It was mainly & mostly the US bank.

    > Actually the Canadian Banks saved our economic buts compared to what is happening in the US
    > and globally.

    The Canadian Bank didn’t save our economics. It is the Canadian government OSFI (Office of the Superintendent of Financial Institutions Canada). They are the one who made sure the Canadian bank do get into too much of the sub-prime.

    > So while I appreciate you do not like a higher int rate which is the same as me and the rest of the world…
    > You need to understand big picture. Lending at 3.25% is hardly gauging. It is practically free money. If the
    > bank was actually making 3.25% I wouldn’t even call that gauging and we all know they are making no
    > where near 3.25% when they lend at prime + 1.

    I personally, I think I understand the big picture quite well.

    Lending at 3.25% is practically free?!? Why would you say 3.25% is practically free?
    If it was practically free, would be 0% or close to 0%? What is the difference between 0% vs 3.25%?

    Currently, TD top saving interest rate is 0.75% for people who has over $60K in their account. Can you compare 0.75% saving rate vs 3.25% mortgage rate? What is the spread on this?
    (0.75% – 3.25%) / 0.75% = 333%

    Beforehand, if we compare 0.75% saving rate vs 2.25% mortgage rate? What is the spread on this?
    (0.75% – 2.25%) / 0.75% = 200%

    Therefore, how much more spread did the bank make when they decided to increase P+1%
    (ie. 333% vs 200%) (200% – 333%) / 200% = 67%

    Personally, I think this quite high. Don’t you agree?

    However, I understand that the people & bank needs to make money. There is nothing wrong in them making money. The bank provides a wonderful service. My big issue is why do they need to change the EXISTING HELOC to P + 1%?

    By changing the agreement/rate, doesn’t it say that Cdn bank are in financial trouble and need more money to keep a float? What does it mean?

    Chad

  39. Hi Chad,

    You are playing with #’s to make them look worse than they are. A 1% increase is 1 percent. Not 67%. Yes I know what you are gtting at but it is still playing with #’s.

    My remark about lending at 3.25% being practically free is that it is. Let me ask you this. If you had $100,000 or $1,000,000 to invest and someone came to you and said lend it to me at 3.25%. You would tell them to get lost, it is not worth your time even with a house as collateral. 3.25% once you factor in taxes and inflation means you are actually losing money. So while I do not like my HELOC going up 1%, you still need to put it in perspective.

    You mention OSFI saving the Canadian Economy? They are the ones who almost FU&^%$ it up restricting what banks can and can not do. Everything the Canadian banks didn’t do (Exception CIBC and National) that the Americans did do was not done because they weren’t allowed to but rather they chose not to. Banks had the ability to go neck deep into sub prime but didn’t for the most part.

    Banks lend their money on heloc’s from the bond market or overnight market. Bank accounts are used for different lending purposes. When LIBOR went up every bank who was lending at prime was taking a beating and losing a crap load on their HELOC business at prime. This is no secret, ask any independent economist anywhere and they will all tell you that as will any University Professor, CNN, BBC, BNN, etc… Lending at prime was never done many years ago or very rarely. Out of greediness banks generally offered it to everyone over the past 10 or 15 years versus their elite clients only and thus overexposed them and they took a beat down. A good client changed from someone with 7 figures on deposit to anyone with a pulse.

    They have now learned their lesson and won’t be so stupid again and thus the interest rate hike. Does the hike mean banks are in trouble??? No, it means they are not stupid and while they may get burnt once they will not let it happen again.

    The Canadian banks make pretty good money (Several Billion). But you need to remember they are massive in size and a few billion isn’t actually all that much. Most of the Canadian Bank are major Global players. RBC is all over the US and South America. TD has more branches in the USA than Canada. Scotia is all over Latin America. These are not the same little Canadaian Banks many Canadians think they are.

    While CIBC has made Billions for many years they almost went Bankrupt when Worldcom and Enron hit and again over Sub-Prime. Making a few Billion is not a lot for companies this size and scope.

    So yes, Prime + 1% sucks for me and you. but we have a choice if we do not like banks. Don’t use them. borrow from your friends and put your cash in your mattress and if you want to buy stocks or bonds fly to Toronto, New York or London to buy your stock or you can go to your bank and buy it for $9 on-line. The banks are too smart to be stupid. If you don’t like em, at least buy stock in them. That is what I did last year and I am smiling.

  40. Splitting Hairs

    Canadian Banks are parasites, and all the money spent on PR will not change this fact. If ever an industry needed a good shake by virtue of allowing more competition, it is the Canadian banking sector. Huge profits made too far too easily, these sloth like dinosaurs need a kick in the hiney, and their bottom line threatened.

    The day that a Richard Branson opens a bank in Canada, will be a welcome and positive first step, it will certainly be a day of celebration at my residence. No, Virgin Banking will be no kind of savior, but at the least they will provide one more option, and by virtue of that, the remaining banks will have to scramble to recoup their lost revenues. The winner will be the Canadian public.

    get er done Richard, Canada needs you to do what you do best, shake the tree a bit

  41. Splitting Hairs

    For those defending the Canadian banks, stating what a great job they did through the recent International banking problems, any “performance” edge, was not because they are great or innovative at what they do, but rather from having only 5 “major” banks, each making huge profits by merely opening your doors each morning. Lack of competition allows the Canadian banks to be conservative and avoid / minimize the kind of risk that Americans banks take on, in order to increase profits.

    No one is saying that the American system with its thousands of banks is the answer (because it is not), but rather that a move be made to increase the number of banks beyond its present level. Obviously, minimizing risk is part of the Canadian psyche, but surely common ground could be found. Defenders of the Canadian system like to state that the Banks are entitled to their huge profits, as it is just Capitalism at work, when in actuality it is the socialist aspect of Canadian banking system that provides such easy profits.

  42. Canadian Banking system is the best in the world,

    and yes the 5 major banks are making a lot of money. The money is put back into the country ie: employees and shareholders.

    there aren’t just a few owners, all the banks are on the stock market. I work for a bank and just noticed how when buying the shares in 2008 have almost doubled since. I’m richer, the bank is richer and the economy is doing great.

    From my experience, the only people who hate the banks are the ones who can’t manage credit and blame the bank because they cannot pay back loans (credit lines, credit cards, car loans). And now they hate the banks which have a stricter lending criteria.

    I’ve worked at a bank for 3 years and recently quit because I just realized how stupid people are. Then again, I worked in a location that had only immigrants and bums.

  43. I am a RBC client and i have an unsecured “royal credit line” with them that I have from a few years ago when I had only ‘ok’ credit. Now my credit is in great shape.

    I went through a broker to set up my mortgage so there is no connection to RBC for that.

    My question is can I still go to RBC and convert my current line of credit to a homeline, or another secured line of credit, by using the equity in my house as security?

    Would love to get my interest rate decreased… any feedback would be helpful.

  44. Hi Aaron,

    There really is no conversion here.

    To do on what you want, firstly, tell RBC that you want to get a secure LOC and move the unsecure balance to secure LOC. Once RBC has approve you and you accept, at that moment in time, your balance will be move, and unsecure LOC will be close down.

    Hope this helps out.

    Ched

  45. To Aaron,

    you can use the equity in your house for a secured RCL (royal credit line) — rate is prime plus 1%

    no homeline unless you have the mortgage with RBC.

  46. When I got my homeline plan I was told the interest rate would not change except with the change in prime rate. That is, the premium was set at zero. There are terms in the agreement that say they can change some rates, but not specifically the premium.

    This still annoys me to no end. Bank client for 40 years, and because I am a valued customer they raise my rate.

    Rates are now heading down. I am I still valued?
    Today I asked for them to reduce the premium again. Let’s see.

    Anyone have any success at getting better rate?

  47. Apart from the hikes in the multitude of services which all banks are making record profits, is the change to senior discounts going from 60 to 65 (RBC)

    What gives them the idea that seniors are richer between 60 & 65 anyway?

    I find this insulting to them, and I’m not even there yet!!!

    Their as bad as the government raising the retirement age from 65 to 67…All to prop up their own mismanagement! *Bast*****!!!