When interest rates change in Canada it's usually the Bank of Canada that determines where that rate is going; and that's determined by government policy, economic forcasts and the supply and demand of money. Banks then use the Bank of Canada's rates to determine what to charge (and pay) for the use of money. The money banks use to lend to their customers comes from people like you and me; with savings accounts, pension plans and bonds. The Bank is really a middle man and yes they ensure they make a profit from the services and loans they provide.
But in a real sense why would the average borrower care? we could discuss concepts of economics and interests rates but the average borrower has a need for a house, a car or something that they don't have the money up front to buy. That's where the interest rates really comes in to hit home. How much is it going to cost?
Whats the best rate?The best rate can be anything but what is it really boils down to is... "What's the best rate for your current financial situation?" An interest rate is based on risk, and how much risk that lender will accept. If you have great credit and little debt you should get the best interest rate and terms for your loan; but if you have problems paying back a loan the risk is greater and the interest rate is adjusted higher to make the loan more attractive to the lender. Different lenders view borrowers with a number of different risk factors. Some use their own internal rating system while others depend on the accuratcy of credit ratings or both. Knowing what lender looks at what will determine largely where a borrower will receive the best interest rate.
For more information on interest rates or credit ratings please contact Rick