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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.& N! h2 l- v* X) Y( E# g1 i! t! }+ P$ B
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.
% \4 x% ]% Z& m7 e8 s" W( ZThe 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.
e: N1 ^8 p5 z7 [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."
) x/ v/ z, z9 Y9 p/ o7 nShortly 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. V% x6 ]7 g- c. T1 m( H
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.( @9 N0 Q8 Q4 V7 M
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 $25 billion of mortgages from their balance sheets to the Canada Mortgage and Housing Corp.
0 |. L2 B9 r) s2 x# j! H$ jTD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.7 `3 J, w# [9 m9 z+ ]
"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.% P& t/ d( a. ?" |$ K, T/ ^
"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."
. {! q4 L" P9 G1 v4 R5 c: s5 ?* CFlaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.4 `7 J4 T2 S, ]! g+ O* b8 Y
"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister." j; {+ ]% }. C9 N. k8 ]
Sonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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