Five big banks raise prime lending rates following rate hike from Bank of Canada

The Royal Bank of Canada sign is seen at its former head office in downtown Toronto, Dec. 2, 2011. (Nathan Denette / THE CANADIAN PRESS)

TORONTO -- Canada's five biggest banks are boosting their prime lending rates by 25 basis points, following an interest rate hike from the central bank.

Royal Bank of Canada (TSX:RY), the Bank of Montreal (TSX:BMO), TD Bank (TSX:TD), Scotiabank (TSX:BNS) and CIBC (TSX:CM) all announced Wednesday they are increasing their prime rates to 2.95 per cent from 2.7 per cent, effective Thursday.

The prime lending rate is the rate that banks use to set interest rates for variable-rate mortgages and other loans.

The moves comes after the Bank of Canada raised its key interest rate for the first time in seven years on Wednesday to 0.75 per cent from 0.5 per cent.