WATCH: Knock down debt and save, says Kelowna credit counselor
KELOWNA – Will last week’s cut in the Bank of Canada’s overnight lending rate mean lower borrowing costs for you? That’s a question many Canadians are asking and so far, the answer is not clear. Currently, very few financial institutions have lowered their rates. However, even if lending rates do go down, credit counselors have some words of caution.
“If we had a variable rate mortgage or we had a line of credit that is based on the prime rate, it could have a little lowering of our interest,” says Ben Neiland with the Credit Counseling Society of BC.
Neiland says even if rates do go down, it’s best to just pay down debt. While there is some speculation that the Bank of Canada will cut its key interest rate again in March, Neiland says if you’re getting a lower rate at your bank, don’t get used to it.
“That’s the key, pay down the debt,” he says. “Rates aren’t going to stay low forever.”
When it comes to the banks passing the savings on to the consumer, it appears they’re waiting to see what move competitors make first.
“We’ll monitor to see what the market does and react accordingly,” says Kevin Smith, Central Okanagan Regional Manager for Valley First Credit Union. “We’re typically market followers with rate so if the big institutions drop the rates, we likely will follow.”
However, he says a prime lending rate reduction isn’t ideal for the credit union because it would mean the institution would profit less.
One local lender has taken action. Summerland Credit Union announced a reduction in its prime lending rate today from 3 percent to 2.75 percent.