Something’s about to hit the fan. The Bank of Canada dropped rates 1/2% and TD and CIBC just announced they’re cutting their prime rate only 1/4%.
This is the first time in a long time that we can remember big-6 banks not following suit with a Bank of Canada rate move.
Everyone is now waiting to see what the other big banks will do. One thing is for sure. This development will definitely get lot of press.
Most people won’t agree with, or understand this move, but TD and CIBC (like most lenders) are not in an easy spot here. Just because Canada’s overnight lending rate has fallen, lenders’ cost of funds have not fallen proportionately. Furthermore, lending spreads (revenue margins) were already tightly compressed prior to today’s action. Some lenders have been forced to charge up to prime + 2% now for variable-rate mortgages.