In the wake of the Bank of Canada’s reduction in its key rate, several banks said Wednesday afternoon that they were lowering their prime interest rates by 0.25 percentage points to 6.95%.
It was the Royal Bank of Canada that got the ball rolling around 2:30 p.m., announcing in a press release that its prime rate was going from 7.20% to 6.95%. In the minutes that followed, Laurentian Bank, Scotiabank, CIBC, Bank of Montreal, Desjardins and TD Bank, in order, did the same.
The new preferential rate will come into force the day after the announcements, i.e. June 6.
Prime rates help determine bank loan rates on everything from adjustable-rate mortgages to lines of credit.
The 2.2 percentage point difference between prime interest rates and the central bank’s policy rate is among the largest gaps in recent decades.
From the mid-1990s to 2008, the margin added was around 1.5%. It rose to 1.75% until around 2015, and since then, an average of 2% has been added to the policy rate.
Banks lowered interest rates in response to Wednesday morning’s announcement from the Bank of Canada that lowered the key rate by 0.25 percentage points to 4.75%.
“If inflation continues to slow and the data continues to reinforce our confidence that it is heading towards the 2% target, it is reasonable to expect further policy rate cuts,” Tim Macklem said. , the governor of the central bank, at a press conference Wednesday morning.