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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.
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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.
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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.
