RBC, other banks cut prime rates to 5.75 percent

TORONTO (Reuters) - Royal Bank of Canada RY.TO was first off the mark on Tuesday in cutting its prime lending rate to 5.75 percent from 6.00 percent, effective Wednesday.

A Royal Bank of Canada (RBC) logo is seen at a branch in Toronto November 9, 2007. REUTERS/Mark Blinch

Its competitors, including Toronto-Dominion Bank TD.TO, Bank of Montreal BMO.TO and Canadian Imperial Bank of Commerce CM.TO, followed with similar announcements.

The moves follow a 25 basis point rate cut by the Bank of Canada.

The prime rate is the rate charged by banks on loans to their best customers, and influences other lending rates and mortgages.

There had been some reports that Canada’s largest banks, facing an economic slowdown, might not match the central bank’s rate cut. It took several hours for Royal to put out the first announcement.

In a commentary last week, JP Morgan economist Ted Carmichael said the spread between the bank rate and the prime rate has been stable since 2000, but moved in a wide range before then.

Spreads between the two key rates widened before or during recessions in 1974-75, 1980, 1981-82, and 1990, when growth prospects deteriorated, Carmichael noted.

As for consumers, the Canadian Bankers Association says on its Web site that they should shop around to find the best rate.

“Don’t be afraid to ask for a lower rate than is quoted. Remember that the posted loan rates are only guidelines,” the CBA advises.

“If you’re not happy with the rate your financial institution quoted, check around to see what other lenders are offering. Your alternatives include banks, trust companies, credit unions, caisses populaires, mortgage loan companies and government lending institutions.”

($1=1.025 Canadian)

Reporting by Lynne Olver; Editing by Rob Wilson