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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.6 c$ d4 q% \# {& ]' q x M
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.1 B8 {# b6 r! s0 r3 \, n
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.7 e9 U! w X* O! A, f; q P/ A
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."
5 M1 p7 t$ ~% w0 VShortly 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.7 S$ e) w7 I3 Y1 v
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.
. {, t' T0 L) T1 j1 y% eFriday's additional trim was credited to the morning's move by Finance Minister Jim Flaherty to allow the banks to offload as much as $25 billion of mortgages from their balance sheets to the Canada Mortgage and Housing Corp.
2 h0 s4 l% m/ X# A& dTD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.4 l' i- I8 g1 ?2 }
"Financial markets are very turbulent, and funding costs are still high," commented Tim Hockey president of TD Canada Trust, the retail arm of TD Bank.% u! [$ w0 @# K2 Y2 b
"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.". }2 l- h9 r! E- g6 h: v* f6 a# L
Flaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.
# q4 ~. G! t3 N X u3 I1 d"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister.) m, X! f7 G% y, O
Sonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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