Thanks to everyone who commented on yesterday’s post with their unsecured line of credit interest rates. The results are hardly scientific, but I have enough data to give people some idea of how their own interest rate compares to others.
The average interest rate was prime+1.7%. Most of the interest rates were between prime+1.5% and prime+2%. There were outliers at prime+0.5%, 1%, and 2.5%. (I didn’t count the response from the anonymous reader who has a line of credit at prime because it seemed to be connected to a brokerage account and I wasn’t sure if it was for margin.)
I didn’t get any responses pointing me to resources to explain what rates consumers can expect. Maybe such resources don’t exist. I suspect that consumers would get better deals if they had some way to compare lending institutions on the interest rates they charge for unsecured lines of credit.
It’s a different story for mortgage interest rates. CanadaMortgage is one of many sources for advertised mortgage rates in Canada. Based on these rates, it’s hard to understand why anyone would get a mortgage from one of the big 5 banks.
Just to pick two examples, both ING Direct and PC Financial beat the big 5 banks’ mortgage rates by between 1% and 2% for every term from 1 year to 10 years. I can understand why people might prefer to do most of their banking with a big familiar bank, but what does it matter who holds your mortgage?
There were fewer choices back when I had a mortgage, but I was willing to go with just about any institution that offered me a low interest rate. I cared who held my money, but I didn’t care as much who lent me money.
Is there some good reason why people choose one of the big 5 banks for their mortgage? Maybe they are able to negotiate the bank’s interest rate down by more than 1%. Or maybe the newer financial companies offering the low rates have strings attached like having to open bank accounts and get credit cards.
I’d like to hear from anyone who knows of a good reason to get a mortgage from one of the big banks. Without an explanation, it seems that people are simply making uninformed (and expensive) choices.