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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.3 k& x" b( g% ~+ D' X
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.! G K F; A* {0 K- L3 F( 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.3 L% u& r" g2 \/ {
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."/ D. u, G7 o% _9 W
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.: r+ q" C( K* E! t) s3 m+ Q) m8 R. R
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.( I3 ~' o% U1 p# ^4 D' r# v$ ]
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.4 I1 E0 e7 w% ^7 @4 O7 j. j1 Y
TD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.
& j& ~0 g1 @# P7 f1 |. t"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.
! O0 v+ c5 U% c& d"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."
* e1 |8 _+ n( R2 {; L0 nFlaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.1 I1 j3 N! l9 r* T
"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister.# a) a! z$ k3 Q7 ], |8 v% H& ~
Sonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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