The Royal Bank of Canada was the first of the major banks to announce it would raise its key interest rate after the Bank of Canada’s bigger-than-expected hike to its benchmark interest rate.
RBC, TD Bank, Canadian Imperial Bank of Commerce, Bank of Montreal and Scotiabank will raise their prime rates by a full percentage point to 4.70%, from 3.70%, effective Thursday. Prime rates are tied to many types of loans, including variable rate mortgages, home equity lines of credit and auto loans.
It’s typical to see major Canadian banks follow in the central bank’s footsteps and adjust their key interest rates right away.
“That means anyone with an adjustable rate mortgage or home equity line of credit (HELOC) will see their interest rate rise accordingly. This group needs to calculate what their new payment will be with this rate increase and also anticipate additional increases this year,” said James Laird, co-CEO of Ratehub.ca, in a release Wednesday.
“Anyone with a fixed rate mortgage is not affected until the next renewal date. If that renewal date is approaching soon, they should start calculating their payments based on the rates available today.
Earlier on Wednesday, the Bank of Canada surprised Bay Street with an all-out hike, taking the overnight rate to 2.50%. This is the largest increase since 1998.
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