I've been receiving many questions from viewers about why the interest rates on their unsecured lines of credit are going up. Many of these ask why the rates are increasing when the Bank of Canada rate is so low.
One viewer was paying in one case to as high as prime plus six per cent -- about a nine per cent interest rate.
This can be seen as a sign of how bad the economy is, or is expected to get. With an unsecured line of credit, a bank is loaning you the money based on things like your job history, income, payment history, credit rating.
But if anything goes wrong it has no security, meaning there is nothing the banks can take away from you.
So the worse the economy is, banks start to worry you could lose your job and they want to be paid for that risk. So that's why unsecured lines of credit or credit card interest rates go up when we all think rates should be going down.
As to mortgage rates that are still falling, that's because they are secured by the value of your house. Now if you are faced with a higher interest rate on anything, shop around to another financial institution.
Credit unions may be a good option because their lending reflects our provincial economy -- which may be the best in the country. The big banks tend to reflect the worsened Ontario economy, so you pay for it.
With a report from CTV British Columbia's Chris Olsen
