The Bank of Canada lowers interest rates to make it more affordable for consumers to borrow. So on March 3 2009 The Bank of Canada lowered it's lending rate to .50% from 1%.
The CIBC was the first bank on air (from the the radio announcer) to indicate they were passing on the rate cut of .50% to it's customers. About an hour later I heard that, all the other major banks in Canada were going to lower there interest rats as well, The Royal Bank, TD Bank, Scotia Bank and The Bank of Montreal all indicated that they would pass on the savings to there customers in the form of lower rates on lines of credit and open mortgages.
I thought great, two months ago I was paying 3.5% (2% over prime) for our line of credit, then about a month ago it went down to 3% (still 2% over prime). Now as of March 3 2009, as I heard the statement from my own bank on the radio, The CIBC "is passing the savings onto the customer", I then should be paying only 2.5% (still only 2% over prime).
Well I thought that was great, because if you read my first article The Banks Ruse, you would be aware that with the lowering of The Bank of Canada rate to just .05% that would help us bring down are monthly debt payment on our $200,000.00 line of credit from $500.00/month at 3%, down to $416.67/month at 2.5%. I was thinking great, this is good for me and anyone else that has a line of credit. That a minimum monthly payment savings of $83.33/month which works out to a $1000.00/ year in savings of interest payments on our line of credit.
I got home from work thinking, today March 3 2009 was one of the few bright spots that accord this year, among all the bad economic news that never seems to relent on a day to day basses. That was until I received our line of credit statement in the mail from CIBC! The statement in of it's self was fine, indicating that our minimum payment was $459.97 for this month at 3% interest. But it's what came with that statement that set me off! CIBC notified us that as of April 6 2009 our interest rate will be going up from 2% over prime to 3% over prime. So instead of our interest rate on our line of credit going down to 2.5% (2% over prime), it will be going up to 3.5% (3% over prime). This on the very day that The Bank of Canada lowers it's overnight lending rate to .05%, to help The Canadian Banks lend more money and to make it more affordable for consumers to borrow money. It should also help the ease of credit by having lower minimum monthly payments, which in turn helps with the debt to monthly income ratio which should help more people to qualify for more loans. Well, it seems that at least as far as the CIBC is concerned, it's nothing more then an excuse for them to raise interest rates back up to where they like them, and then, they The CIBC can make more margin on interest charges. How Nice!
Now you might be thinking that maybe we did something wrong, like miss a payment, or being late on a payment, NO. We have not missed a payment on our line of credit or any other bill payment in the last 15 years. We are already in a bind with regards to our mortgage because Accredited Home Lenders which has our mortgage is in trouble and is calling in the loan on our house. So we are already being squeezed by The Canadian Bank's new system of qualifying for a mortgage or any other loan. Right now I'm just trying to save our house from bring foreclosed on, and now the banking system in Canada is again squeezing the customer by raising rates when the rates are going down. And this has nothing to do with our credit history, our credit score or ability to pay.
The fact is, the banks have changed the rules on how they lend money, provide credit and charge customers interest on existing lines of credit from just 6 months ago, which has nothing to do with one's own credit rating.
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