Unexpected Interest Rate Cut - Prime Rate 4.50%

The Bank of Canada cut its key interest rate by 50 basis points to 2.50 percent today in a coordinated effort with other central banks to help calm the financial markets. The decision to lower its key rate ahead of its scheduled interest rate announcement on October 21 came along with rate cuts from central banks across the world.

Normally, the banks move in "lock step" with the Bank of Canada's interest rate cuts But this time around Canadian banks will pass along only part of a central bank rate cut to the borrowers. TD Bank cut its prime lending rate by 25 basis points to 4.50%. Other banks are expected to follow the lead soon. Experts say even if the banks are able to cut official prime lending rates, consumers will be unlikely to receive the full benefit as banks reduce loan discount rates to cover the difference.

The Bank of Canada may cut its benchmark interest rate again on Oct. 21st. The central bank said in its announcement that it would carefully monitor events to judge whether further action might be required.

If you have a variable rate mortgage that you got more than a year ago at prime minus 0.8% you will save some money on your mortgage payments. But if you are getting a new mortgage or refinancing the benefit is not going to be the same but its still a lower rate than yesterday.

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