Wednesday, April 23, 2008

A question about interest rates

Well, although they took their time, the Canadian banks have indeed dropped their prime lending rate in response to yesterday's Bank of Canada rate cut. With the overnight rate at 3.00%, and bank prime at 4.75%, let's see what happens with online savings account rates. Will we see an ING rate below 3%?

In previous discussion about the impact of rate cuts on mortgage and loan rates, I've seen a lot of talk about LIBOR as a benchmark for the cost of lending. This seems to be a more universal version of a central bank interest rate, and I've heard reference to loans and mortgages that are actually indexed to LIBOR as opposed to bank prime.

I don't know a lot about this, so I put the question to you: do you know of any institutions in Canada that offer loans indexed directly to either LIBOR or the BoC rate?

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