Written by 11:06 AM Interest Rates • 25 Comments Views: 1

RBC’s New LOC Blitz

RBC-MortgageRBC has a new campaign to promote its prime + 0.50% lines of credit (LOCs). Its ads will appear on 270 billboards, 85 newspapers and 50 radio stations. (See this Post story.)

Despite RBC’s media push, this isn’t big news. Prime + 0.50% has been around since fall 2009 (See RBC Cuts HELOC Rates).

Moreover, and contrary to the Post’s article, BMO is not the only other Big 6 bank with prime + 0.50%. Other banks don’t conspicuously promote it, but well-qualified borrowers can often get that rate just by calling a mortgage specialist and quoting RBC and BMO.

Banks also offer prime + 0.50% through the broker channel, as they have for well over a year now.

Lidia Parfeniuk, an S&P credit analyst, told Bloomberg: “We have observed that the banks are ratcheting up competition in the pricing of retail (particularly mortgages).”

RBC’s Canadian Banking boss, David McKay, says: “We’re attacking, aggressively…Now is the time to attack on price, because that’s a big differential to the customer.”

Low rates are always welcome, but with prime + 0.50% widely available, you’ll also want to compare LOC features.

Here are some common differences that separate competing lines of credit:

  • Mortgage features and rates
    • This is obviously a factor if you’re getting a mortgage along with your credit line—i.e., a readvanceable mortgage.
  • Interest offsetting
    • National Bank and Manulife have this feature, and it’s a helpful way to save interest.
  • Number of sub-accounts
    • Multiple sub-accounts are useful if you need to track interest separately for investment or business-related borrowing.
  • Online transfers directly from the LOC
    • This is a convenience feature that lets you pay bills or fund an investment account directly and automatically from your LOC.
  • Credit line portability
    • Portability is nice if you move and want to bring your LOC (and its interest rate) with you.
  • Ability to lock in
    • Some lenders let you convert individual portions of your prime + 0.50% LOC to a discounted fixed or variable-rate mortgage, any time and at no cost.
  • Free banking
    • This can be worth $500+ over five years.
  • Linked bank cards
    • Some lenders offer a credit or debit card that’s linked to your LOC.

If you need a hand sorting this all out, call an experienced mortgage planner. They’ll compare all the banks’ credit lines for you and suggest the cheapest option with the most flexibility.

Rob McLister, CMT

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Last modified: April 28, 2014

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