TD announced this past week that they will be introducing a $35 inactivity fee on all their unused lines of credit. This fee will be introduced in April. But it doesn’t stop there, for those who do use their credit lines, TD will raise the borrowing rate by an additional 0.5%, moving the rate to 4.4% above prime. Currently with prime at 3.00%, the new borrowing rate will be 7.4%. Still a decent rate when compared to many auto loans and credit cards however, if compared to a secured line of credit, ie. Home Equity Line of Credit (HELOC) the rate is Prime + 1% (4%). On an average $25,000 balance on a credit line compared to a HELOC the savings would be $70 per month.
TD isn’t the only bank to be increasing their unsecured credit lines. BMO has planned to increase their rates by one full percent on March 4 on all of their credit lines. As of now the other major banks have not decided whether they will increase their lending rates.
This increase was just days after all the major banks decided to pass on the 50 basis point drop from the Bank of Canada rate drop announcement on January 20th. The drop has decreased all posted mortgage rates and HELOC rates. But for those without the equity in a home, it would appear the banks have pushed their declining profit on to you, even though they believe they are still within fair lending rates. Paul Gammal from BMO stated ” From our survey of the market, our personal-line-of-credit offering is competitive and, in fact, favourable, compared to some of our major competitors.”
With these new charges and increases in rates it may be time to access some of the equity in your home. With a HELOC you can have the same flexibility and benefits of an unsecured line of credit but with a lower rate and no additional charges.
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