Big banks hike prime interest rate after Bank of Canada decision

Click to play video: 'Bank of Canada raises key interest rate to 0.5%'
Bank of Canada raises key interest rate to 0.5%
The Bank of Canada announced a widely-expected 25 basis point rate hike, bringing its bench mark lending rate to half a per cent. This is he first time the bank has hiked, since it was forced to slash interest rates to emergency levels at the start of the pandemic. Anne Gaviola has more – Mar 2, 2022

Numerous Canadian banks said Wednesday that they are increasing their prime interest rate by 25 basis points following the Bank of Canada‘s rate announcement earlier in the day.

The central bank said it was increasing its key rate by a quarter of a percentage point to 0.5 per cent in a bid to help fight inflation which is at its highest level since 1991.

Canada’s Big Five banks — RBC, TD Bank, BMO, CIBC, and Scotiabank — all said they would increase their prime rates to 2.70 from 2.45 per cent, effective March 3.

Desjardins Group and Equitable Bank also said they would follow through on the same rate change.

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The rise in rates will increase the cost of loans such as variable-rate mortgages that are linked to the benchmark, but won’t directly affect fixed-rate mortgages.

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The Bank of Canada said it would likely need to raise rates further to reduce inflation, which hit 5.1 per cent in January.

Click to play video: 'How a Bank of Canada interest rate hike could affect you'
How a Bank of Canada interest rate hike could affect you

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