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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./ z" G' P l% T& }7 Z% `, o
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.
/ K( Y# i! t" oThe 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.' B* Q& F; j5 I3 s3 K; y
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."8 t( |8 p4 Q; M. j- `4 U
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.
# _. x, s O1 v* r! `) EThe 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.
2 }6 g2 Q. q0 R* @: h; O* J$ tFriday'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.
% B. g( _# J6 T" C: u0 WTD said this should reduce the banks' cost of financing, in turn allowing them to trim the price of loans.
$ |" z- M" H2 w* {9 _# {7 Q8 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.
0 X$ }% f# J8 j: X"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."
+ B+ w7 z) Y. GFlaherty said the federal government will buy up to $25 billion in residential mortgages from the banks and shift them to CMHC.
8 C! _9 v" _4 Q& R) Z- b"This is going to make loans and mortgages more available and more affordable for ordinary Canadians and businesses," said the finance minister.
& @/ x9 U% {' O+ Z% n( nSonia Baxendale, CIBC's chief of retail markets, called the government's action "positive." |
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