Canadian banks increase prime lending rates by 75 basis points to 5.45 percent
Canadian banks raise prime rates after Bank of Canada hike
Denise Paglinawan
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Canada’s six big banks have all raised their prime rates after the Bank of Canada hiked its key rate to 3.25 per cent Wednesday. Photo by REUTERS/Mark Blinch/File Photo
Major Canadian banks have increased their prime lending rates by 75 basis points to 5.45 per cent in response to the Bank of Canada’s move Wednesday to raise its key policy rate to 3.25 per cent.
Toronto-Dominion Bank, Royal Bank of Canada, Canadian Imperial Bank of Commerce, Scotiabank, Bank of Montreal and National Bank of Canada all had their prime lending rate at 4.70 per cent prior to the announcement.
The new prime rates come into effect Thursday. The hike in prime lending rate at Canadian banks indicate a higher starting point for lenders’ loan calculations.
Stephen Brown, senior Canada economist at Capital Economics, said major lenders matching the Bank’s policy rate by increases in their prime rates will mean an immediate jump in borrowing costs for many Canadians.
He said the hike in interest payments is worth about 0.5 per cent of household income at a national level, but the costs are heavily skewed toward those with variable rate mortgages, as the increase will take a much larger share of their income.
“This is likely to feed through to a reduction in household spending on goods and services and raises the downside risks to the economic outlook,” Brown said.
The banks’ announcements come after the central bank hiked interest rates 75 basis points on Wednesday, the fifth consecutive increase since it started tightening in March.
The central bank said more hikes are on the way to tame inflation that continues to be too widespread in the economy.
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