Prime? What’s Prime?
I had an interesting discussion with a fellow personal finance blogger Arjun Rudra (on Twitter), about Mortgage rates and he was pointing out that a lot of the banks are lowering their Mortgage Rates, which is great news for those folks looking to renew their mortgages, or buying a new house.
I pointed out to him that the Line of Credit that I have for my house’s rate is not going to drop. He commented to me that it might in a while, but I pointed out that a Secured Line of Credit’s interest rate is set to the “Prime“, but don’t get confused it is not the Bank of Canada Prime rate.
Wait a minute, you think, how can the word Prime mean two different things with banks? Simple, it is the Bank’s (not Bank of Canada) PRIME rate, of course if they called it their Best Rate that might be confusing, so Prime is less confusing for folks, isn’t it?
A dictionary would give us this interesting definition of Prime:
of the greatest relevance or significance
Which is interesting too, thus your Prime Rate would be your Most Relevant Rate as well, however another definition is also:
So that would make the Bank’s Prime Rate a First-Rate Rate? You could say this was their First Rate Squared, which would even sound better to a lot of the consumers out there, wouldn’t it?
It is easy to get fooled or confused by the Consumer Bank’s using the same terms as the Bank of Canada does, and I am sure there are a few folks who have been tripped up by this, so it never really does hurt to ask anyone in a Bank, “What do you really mean by that term?”. It allows you to understand their definition, so you don’t make assumptions that might cost you money later.