Canadian big banks are raising their prime rates to 6.45%

Following Wednesday’s interest rate increase by the Bank of Canada, big banks raise their lending rates.

RBC, TD Bank, BMO, CIBC, Scotiabank, and National Bank decided to increase their prime rate from 5.95% to 6.45% after the central bank’s recent hike.

The decision is the response to the BoC’s 0.50% increase, which has led its key lending rate to 4.25% this week.

The Bank’s overnight rate has gone up by 4% as the result of seven hikes seen during 2022 – it’s one of the fastest and most severe tightening cycles on record.

The central bank’s policy rate affects lending rates for major financial institutions and usually increases the cost of borrowing for Canadians with certain types of debt.

Commercial banks use prime lending rates as benchmarks for such loans as variable rate mortgage products and home equity lines (HELOC) they offer to homeowners.

For the average variable mortgage holder, a December rate hike means higher payments starting next month. For every $100,000 of the outstanding mortgage balance, they will pay approximately $30 more per month. HELOC owner will pay approximately $42 more per month for every $100,000 of the balance.