We have seen residential mortgage rates rise throughout the recent weeks, and we are now seeing Canada`s largest bank drop its interest rates on its popular consumer loan.
Royal Bank of Canada (RBC) plans to reduce the rate on its RBC Homeline Plan line of credit by 0.4% to 2.7, effectively on Thursday October 22nd, 2009.
The new interest rate is equivalent of the bank`s prime rate plus 0.5%.
With this recent decrease it gives Canadian a much needed break in terms of financing on their largest purchase, their home.
As a reminder, RBC Homeline Plan is a secured line of credit; it technically is a type of home equity line of credit that can include up to 5 mortgage and 5 line of credit segments.
Generally, a home equity line of credit is a revolving credit product that allows consumers to use the equity of their homes to borrow cash.
What this means is that, the RBC Homeline Plan will allow homeowners the ability to split their home financing into various mortgage segments that can include fixed and variable rate mortgages, coupled with one or more line of credit.
The new rate is not a limited time offer, but it must be noted that it only apply to new lines of credit.
At this point in time, homeowners can use the RBC Homeline Plan to help diversify their interest rates and ultimately lower their overall borrowing costs.
RBC `s line of credit reduction comes at a time when other big banks have recently raised rates on their personal line of credits.
Toronto-Dominion Bank (TD) has informed customers that have home equity lines of credit that their base rate will increase by 1 percentage point on November 16th. This makes the lowest available rate after that time at 3.25% or prime plus 1%.
Meanwhile we have seen the Bank of Montreal (BMO) raise interest rates on personal lines of credit by 1 percentage point as well in March. However it was recently said by BMO executives that if credit spreads and funding costs continue to shrink, BMO would consider giving back some of the price increases. At this point in time there are no details on the potential timing of this.
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