Canada’s big five commercial banks have each raised their prime lending rates to 4.70%
following the Bank of Canada’s one percentage point increase to its trendsetting overnight rate.
RBC (RY), TD Bank (TD), Canadian Imperial Bank of Commerce (CM), Bank of Montreal
(BMO), and Scotiabank (BNS) each lifted their prime rates by a full percentage point to 4.70%
from 3.70% effective today (July 14).
Prime rates are tied directly to many types of loans that impact consumers, including variable
rate mortgage, home equity lines of credit, and car loans.
The country’s big five banks typically adjust their prime lending rates along with the Bank of
Canada.
The interest rate adjustment by the commercial lenders comes immediately after the Bank of
Canada surprised economists and markets with a full percentage point interest rate hike,
bringing its benchmark overnight rate to 2.50%.
The Bank of Canada’s latest move was the biggest one time increase to interest rates since
1998. Markets and economists had forecast a 75-basis point interest rate hike.
The central bank said that the latest rate increase is needed to lower inflation before it becomes
entrenched in the economy. Inflation in Canada is currently at 7.7%, its highest level in 40 years
and well above the Bank of Canada’s 2% target.
“By front-loading interest rate increases now, we are trying to avoid the need for ever higher
interest rates down the road,” said Bank of Canada Governor Tiff Macklem.