# TD LOC variance rate change -- anyone else get a significant increase?



## JC NewGrad (Jun 2, 2009)

Hi,

I just got a notice in the mail letting me know that the variance rate on my LOC (at TD) is going up by 3%. My prime + 2.25% is now going to be prime + 5.25%. That seems like a pretty significant jump to me, so I called TD to see if something happened. I thought maybe something fishy was going on, since I always pay my bills on time, etc.

They kept "reassuring" me that it is just because they haven't assessed the rates in five years, and that the assessment was based on my relationship with TD, not on credit scores or anything. I am ordering credit reports from Equifax and Transunion anyhow, but does anyone else think this seems weird?

I would understand a .5 or even 1% change, but 3%? Wouldn't that suggest to you that TD is looking at you in a more negative way, in terms of your relationship with them?

Does this seem normal?


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## MoneyGal (Apr 24, 2009)

I got the same notice and I haven't used that LOC in over 5 years. (It was a big line I established when I was getting divorced and my finances were crazy...luckily, that's long ago.)

Rob Carrick put something on his Facebook page about this - I actually thought perhaps it was a notice specific to me, because I don't use the line. But apparently not!


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## HaroldCrump (Jun 10, 2009)

Is it possible that the banks are getting more risk averse, given the high rate of household debt?
Perhaps they are increasing the rates on LOCs to discourage further borrowing and for pricing in the true risk of those consumers that use LOCs as their chequing accounts.


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## JC NewGrad (Jun 2, 2009)

At least I'm not the only one! Thanks for the heads up about Rob Carrick's post, MoneyGal. I just checked it out and it relieved me somewhat.


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## Beaver101 (Nov 14, 2011)

JC NewGrad said:


> Hi,
> 
> *They kept "reassuring" me that it is just because they haven't assessed the rates in five years, and that the assessment was based on my relationship with TD, *not on credit scores or anything. I am ordering credit reports from Equifax and Transunion anyhow, but does anyone else think this seems weird?
> 
> ...


 ... CIBC pulled this number a few years ago ... called and complained to the personal bank manager about this arbitrary increase and so much for being a credit-worthy long-time customer (20 years+) .. was told "don't use it if you don't like the rate". So I won't and not buying their stocks either. So much for the customer relationship ... seems like TD is going that route now.


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## Dibs (May 26, 2011)

As MoneyGal mentioned, Rob Carrick published something about this in todays Globe and Mail:
http://www.theglobeandmail.com/glob...-the-pinch-as-banks-cut-risks/article2328581/


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## Cal (Jun 17, 2009)

HaroldCrump said:


> Is it possible that the banks are getting more risk averse, given the high rate of household debt?
> Perhaps they are increasing the rates on LOCs to discourage further borrowing and for pricing in the true risk of those consumers that use LOCs as their chequing accounts.


I agree, also, I think they would not mind if a few people simply close the accounts, that would reduce their risk exposure, and the higher rates should cover the profit margin.


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## canadianbanks (Jun 5, 2009)

HaroldCrump said:


> Is it possible that the banks are getting more risk averse, given the high rate of household debt?
> Perhaps they are increasing the rates on LOCs to discourage further borrowing and for pricing in the true risk of those consumers that use LOCs as their chequing accounts.


That's the way I see it as well and I don't consider it to be a bad thing in the long run. I mean artificially cheap money are creating all sorts of economic distortions, which we all have to pay for in the future.


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## stephenheath (Apr 3, 2009)

Cal said:


> I agree, also, I think they would not mind if a few people simply close the accounts, that would reduce their risk exposure, and the higher rates should cover the profit margin.


This is my guess too, with the new Basel III rules they probably have to have a lot more capital on hand for all these accounts so want them to pay back when used to make it worthwhile.


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## marina628 (Dec 14, 2010)

That is crazy considering their emerald Visa cards are only 4.75%


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## Square Root (Jan 30, 2010)

This reminds me of the powerless feeling I felt in tne early '80's when mortgage rates were going through the roof. Wasn't much you could do but complain. Unfortunately, the only long term solution is to pay your high costs debts off.


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## uptoolate (Oct 9, 2011)

Just checked on mine and it is still at 3.00% but it is a secured LOC. I am like MoneyGal and haven't used it for quite awhile. Think of it more as my 'Emergency Fund'.


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## Four Pillars (Apr 5, 2009)

My rate went way up. I had pretty much forgotten about it - I guess I should figure out how to close it.


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## 0xCC (Jan 5, 2012)

I actually had to double check the letter I got this week after reading the G&M article and this thread. I am getting a decrease effective April 2. Currently the rate on our unsecured LOC is 5.5% and on April 2 it will go to 5%. I haven't used the account for at least 5 years and it has a fairly low limit, my secured LOC has 10x the room on it that the unsecured one does.


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## lowent (Oct 1, 2009)

A drop in my TD unsecured LOC here too, from P+7% to P+4%. The original rate was probably gouging (received it just soon after graduate school), but I cared not because I actually used the credit only occasionally to smooth out temporary cash flow dips.


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## OptsyEagle (Nov 29, 2009)

Cal said:


> I agree, also, I think they would not mind if a few people simply close the accounts, that would reduce their risk exposure, and the higher rates should cover the profit margin.


Well lets see. If the money they are lending requires them to pay even 1% then before they were making 5.25% - 1% = 4.25% gross interest income.

Now they make 8.25% - 1% = 7.25%. That is 70% more money. So as long as less then 40% of the people (who actually carry a balance) leave, they are still making more money and require a lot less capital. 

Let's face it. It is a lot easier to leave it when your LOC balance is at $0, then it is if you owe $10,000 or so. I imagine if a person owed $10,000, even at 5.25%, they would have paid it off, if they could. I imagine the bank knows exactly what they are doing.


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## doctrine (Sep 30, 2011)

Unsecured rates have been going up in general. 4-5 years ago, you could get a LOC for P + 2% quite easily. As of last year, typical rates were heading to P + 3.5%. Now, its more like P + 4.5%. Why?

It's not about risk. It's about making money. They gave out P + 2% when prime was higher. Now that prime is lower, and doesn't look like its heading higher anytime soon, the banks need to get more money.

Sooner or later, they'll start going after the secured line of credits as well, but for now it seems the war is on the unsecured ones.

The only thing you can do is to shop around a little and close accounts with the highest rates, or pay them off and don't use them.

RB and PC both offered me unsecured LOCs in the P + 4.5% range. No way. You can get a low interest credit card for less than that (I have two at 5.9%).


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## pwm (Jan 19, 2012)

I'm planning to borrow from my unsecured LOC at TD to invest in some securities yielding around 6%. Seems like a safe bet. 

The rate is currently at 4% as it has been for some time. I'm interested in opinions on the 4% rate. What are you paying on an unsecured LOC? Is 4% a good rate today?

Thanks in advance.


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## Daryl-Manitoba (Sep 14, 2010)

The rate on my Homeline LoC through Royal Bank is currently at 3.5%. I also know that ING Direct's HELOC is 3.65% right now.


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## Eclectic12 (Oct 20, 2010)

Daryl-Manitoba said:


> The rate on my Homeline LoC through Royal Bank is currently at 3.5%. I also know that ING Direct's HELOC is 3.65% right now.


My HELOC is still 3.00% .... hopefully there are no letters in the mail! :rolleyes2:


Cheers


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## DanFo (Apr 9, 2011)

I just got my LOC @ prime +4.5 so 7.5%.....I probably could get a better rate if I went in to the bank instead of doing it online but the purpose of my LOC was take advantage of a Credit card reward program and I never intend to actually borrow from it..... else I would have went with a secured LOC


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## balexis (Apr 4, 2009)

Daryl-Manitoba said:


> I also know that ING Direct's HELOC is 3.65% right now.


ING now has HELOC? I thought they didn't do that in Canada...


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## Just a Guy (Mar 27, 2012)

With the TD Helocs you can lock in portions at current mortgage rates, not sure if you can do the same with unsecured ones. It's a great idea to do this, lower rates and it pays down the loan, plus the rates are locked in.


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## Daryl-Manitoba (Sep 14, 2010)

Balexis, I don't know anyone who actually has one but they do advertise a rate for one on their Mortgage page.


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