Canada’s Big Banks increase their Prime lending rates following Bank of Canada

Canada’s biggest banks have raised their prime lending rates on the same day the country’s central bank moved its benchmark interest rate a quarter percentage point higher.

The Bank of Canada raised its key lending rate by a quarter point to 1.25 per cent today morning, the third time it has moved its benchmark rate from once-record lows last summer.

The Bank of Canada raised its key interest rate from a record low today, the first Group of Seven country to do so since last year’s global recession. The Bank of Canada photographed in Ottawa, Ontario, Canada, Tuesday, June 1, 2010. Photographer: Patrick Doyle/Bloomberg News.

Canada’s 6 biggest banks — Royal, TD, CIBC, BMO, National Bank of Canada and Scotiabank — all hiked their own prime lending rates by a quarter percentage point, effective tomorrow.

As of Thursday, Jan. 18, all five now have the same prime lending rate of 3.45 per cent. Prior to the Bank of Canada’s move, their rates were all 3.2 per cent.

A BMO spokesperson said its rate changes “reflect the current competitive environment, cost of funds and other market considerations.”

The central bank was widely expected to raise its rate after data in recent months showed gross domestic product growing, the job market healthy and the cost of living ticking higher.

The bank’s benchmark rate is now at its highest level since 2009.Rate hikes from the central bank can add up fast for Canadians with variable rate mortgages. Reaction to the rate move was muted, as the decision was very much expected.