Banks respond to BoC cut by lowering prime rates

Several banks have reduced their prime lending rates after the Bank of Canada cut its key interest rate by another 50 basis points Friday.

Scotiabank, Bank of Montreal, Toronto-Dominion Bank, CIBC, Royal Bank of Canada, National Bank and HSBC Canada have all lowered their prime lending rates by an additional half a percentage point to 2.45%.

The BoC said its decision to lower rates is aimed at cushioning the economic shocks from Covid-19 by easing the cost of borrowing.

The central bank’s cut to 0.25% put the overnight rate at an all-time low last seen in 2008-09.

The unexpected decision marks the second time this month the bank has made an unscheduled rate cut and the third cut overall since the start of March, when the rate was 1.75%.

The lower overnight rate is also impacting fund fees.

Horizons ETFs Management (Canada) Inc. said on Monday that it’s reducing the annual management fee on its high-interest savings Horizons Cash Maximizer ETF by 10 basis points, to 0.08%.

The Bank of Canada cuts have reduced the fund’s gross yield to less than 0.75%, compared to roughly 2.25% when the fund launched, a release said.

Staff

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