Royal Bank of Canada and TD Bank were the first of the country's Big Five banks to announce increases to their prime lending rates. (Getty Images)
Canada's biggest banks are raising their prime lending rates after the Bank of Canada on Wednesday hiked its benchmark interest rate by another 75 basis points.
Royal Bank of Canada (RY.TO) and TD Bank (TD.TO) were the first among the country's Big Five banks to announce increases to their prime lending rates, followed by the Bank of Montreal (BMO.TO), Scotiabank (BNS.TO) and CIBC (CM.TO). Each bank says it will raise its prime rate by 75 basis points, from 4.7 per cent to 5.45 per cent. The change goes into effect from Thursday.
The Bank of Canada increased its benchmark interest rate, which affects the prime rates at Canadian banks, by 75 basis points to 3.25 per cent on Wednesday. The decision marks the fourth consecutive outsized hike and fifth increase since the central bank began aggressively tightening its monetary policy in March.
The prime rate is the annual interest rate that banks and financial institutions use to set interest rates for loans and lines of credit. Since the Bank of Canada began increasing its benchmark rate in March, the prime rate at Canadian banks has jumped from 2.45 per cent.
Those with variable-rate mortgages or a home equity line of credit may see an increase to monthly payments as a result of the central bank's latest rate hike.