Bank of Canada Makes History - Prime Rate @ 3%

The Bank of Canada has cut its main interest rate by half a percentage point to one per cent - lower than in 1958, when the most-watched policy rate was 1.12 per cent. This cut brings key interest rate to the lowest level in Canadian history.

Shortly after the central bank cut its rate, the big commercial banks reduced their prime lending rates by the same amount. Prime rate - the benchmark for a wide variety of loans - now stands at 3%. In December, when the central bank slashed its overnight rate by three-quarters of a percentage point, the banks decided to cut prime by just half a point.

This is the third interest cut announced by the Bank of Canada since the economic crisis began in September last year. The bank has also pumped billion of dollars into the system to ease credit supply.

The cut in the prime rate, which takes effect today, will reduce borrowing costs on floating-rate loans — including mortgages — tied to prime and ease the debt burden for those with existing variable rate loans.

**Fixed term mortgage rates are also coming down at most banks.

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