The decision to increase its benchmark interest rate to 1.5 per cent on Wednesday prompted all of Canada's Big Six banks to raise their prime rates, thereby passing the rate increase along to their customers.
Those with variable-rate mortgages will now face higher interest payments, a concern for many Canadian households that are already saddled with hefty debt loads, said Samantha Brookes, chief executive officer of brokerage Mortgages of Canada.
After the central bank's announcement, Royal Bank of Canada, TD Canada Trust, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank all said they will increase their prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday.
The increase raises the cost of borrowing for customers with variable-rate loans, but people with money socked away in savings accounts and guaranteed investment certificates will benefit, said Scott Hannah, the president and chief executive of the Credit Counselling Society.
Overall, the impact of the latest rate hike will be modest for consumers, said Meny Grauman, an analyst with Cormark Securities Inc. The rate hike is in reaction to a healthy Canadian economy, which is beneficial, he added.
Rates are slowly on the way up, but remain relatively low historically, Grauman added