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TORONTO — Canada's big banks are passing on more rate cuts to consumers and companies after credit markets freed up Friday in the wake of federal government help for the mortgage industry.$ o% t7 j( C: {& T
TD Canada Trust (TSX:TD) said it will lower its prime lending rate by 15-hundredths of a percentage point to 4.35 per cent, effective next Tuesday.8 |% W1 o0 {7 J: h
The Bank of Nova Scotia (TSX:BNS) announced shortly afterward that it is cutting its prime rate by a quarter-point to 4.25 per cent.
1 { _1 w' Z3 r/ UChris Hodgson, Scotiabank's head of domestic personal banking, stated that: "At a challenging time in world financial markets, this reduction in interest rates reflects actions initiated by the Bank of Canada and the federal government."3 N; w& R$ T6 s6 H3 S$ B; e
Shortly afterward, CIBC (TSX:CM) chimed in, matching the smaller TD trim in the prime rate - the benchmark for a wide range of lending to individuals and corporations.
: D4 c ?) R6 r7 g: z' E5 vThe banks had come under fire earlier this week after they passed on only half of the 0.50-point cut in the Bank of Canada's overnight rate, which was part of a co-ordinated effort by major central banks to ease credit markets.
0 b) H* E8 @+ ~. n& L% n; \Friday's additional trim was credited to the morning's move by Finance Minister Jim Flaherty to allow the banks to offload as much as $25 billion of mortgages from their balance sheets to the Canada Mortgage and Housing Corp.
& k' c7 r- b! p- @( |$ J1 o1 ^TD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.
`+ a: n3 N% y, e) ~5 U, E"Financial markets are very turbulent, and funding costs are still high," commented Tim Hockey president of TD Canada Trust, the retail arm of TD Bank.
* c* t% v) G# m! \3 D* z"However, we anticipate that our cost of funds will decrease with the implementation of this program, and therefore wanted to take action that will benefit our customers directly."
9 h; X9 d" G& Q q$ B2 @( EFlaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.* L. P& W! l P2 c) ]
"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister.
. C8 U% E* D4 K# f9 E G7 O$ tSonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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