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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.
2 ~! `3 z" d sTD 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.
$ r& ?2 l O% f' _6 G* r% YThe 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.3 V, j* f: M6 \' I
Chris 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."$ k2 [' C9 F" g
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.% J0 P8 |, |+ ?7 D% t( x' o
The 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.+ ^# u; R- F9 h8 p/ _9 A
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.; F+ ^% S9 e, e2 Z, z; ?; N
TD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.
( F! j5 d* q: o3 y1 f6 u5 J"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.
) I3 q1 r: Y: E! {4 p1 d, c"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.": z( a. |) t4 a
Flaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.
% i+ Y* e2 C- v4 z"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister.
5 R5 e" R. r4 LSonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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