BMO, CIBC, HSBC, National Bank, RBC, TD, Scotiabank and Desjardins have all raised their prime lending rates after the Bank of Canada increased its benchmark rate Wednesday morning.
Their prime rates will increase by a quarter of a percentage point to 3.70% from 3.45%, effective July 12.
The rate hike will raise clients’ cost of borrowing for loans linked to prime, such as variable-rate mortgages and credit lines.
The latest monetary policy report, accompanying the central bank’s rate hike, notes that about one-quarter of outstanding mortgages have variable rates, and that clients with these mortgages will feel the impact of higher rates when they renew their mortgages.
The central bank also discusses the impact of rising rates on clients with five-year, fixed-rate mortgages, up for renewal in 2019 and 2020. Using certain assumptions, the report shows that these clients’ mortgage debt-service ratios will be negatively affected by higher rates.
Such effects are part of the Bank of Canada’s projections. Says the report: “Estimates of the impact of higher interest rates are in line with interest rate sensitivities embedded in the [central] bank’s macroeconomic projections for household disposable income and consumption.”
Note: This story was updated to include HSBC.