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RBC Hikes Rates on Secured Lines of Credit

November 24th, 2009 · 29 Comments

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%.

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29 responses so far ↓

  • 1 Big Cajun Man // Nov 24, 2009 at 9:23 am

    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 Michael James // Nov 24, 2009 at 9:28 am

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

  • 3 Jason // Nov 24, 2009 at 12:09 pm

    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 Aolis // Nov 24, 2009 at 12:18 pm

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

  • 5 Jess // Nov 24, 2009 at 12:33 pm

    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 Adam // Nov 24, 2009 at 1:03 pm

    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 Jess // Nov 24, 2009 at 1:16 pm

    @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 supersocco // Nov 24, 2009 at 2:22 pm

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

  • 9 Jess // Nov 24, 2009 at 3:24 pm

    @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 boko // Nov 24, 2009 at 4:31 pm

    “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 // Nov 24, 2009 at 5:49 pm

    @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 Adam // Nov 24, 2009 at 6:34 pm

    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 Chris // Nov 24, 2009 at 9:10 pm

    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 FeedUpCanadian // Nov 24, 2009 at 9:35 pm

    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 // Nov 24, 2009 at 10:09 pm

    @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 Jason // Nov 25, 2009 at 2:40 am

    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 ted // Nov 25, 2009 at 12:12 pm

    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 Adam44 // Nov 25, 2009 at 1:05 pm

    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) // Nov 25, 2009 at 1:18 pm

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

  • 20 gpsguy55 // Nov 25, 2009 at 8:41 pm

    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 ted // Nov 26, 2009 at 2:02 pm

    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 dr // Nov 27, 2009 at 6:07 pm

    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 Jess // Nov 27, 2009 at 6:21 pm

    @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 Jeff // Nov 27, 2009 at 8:18 pm

    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 financialjungle // Nov 29, 2009 at 7:49 pm

    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 Brendan // Dec 1, 2009 at 6:34 pm

    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 Doc9911 // Dec 2, 2009 at 3:38 am

    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 RBC Hikes Rates on Secured Lines of Credit | Canadian Capitalist Litigation just to Me // Dec 3, 2009 at 9:00 pm

    [...] here to see the original:  RBC Hikes Rates on Secured Lines of Credit | Canadian Capitalist By admin | category: lines of credit | tags: credit-card, fica-the-biggest, [...]

  • 29 Harvey // Jan 17, 2010 at 3:52 pm

    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%

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