Royal Bank raises prime rate to 3.7 per cent following BoC rate hike

A Royal Bank of Canada sign is pictured in downtown Toronto on Dec. 2, 2011. (Nathan Denette / THE CANADIAN PRESS)

TORONTO - The Royal Bank has raised its prime lending rate after the Bank of Canada increased its overnight lending rate to financial institutions.

RBC says it will increase its prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday.

The rate has been set at 3.45 per cent.

The increase will raise the cost of borrowing for customers with loans linked to the prime rate such as variable rate mortgages and lines of credit.

The Bank of Canada raised its target for the overnight rate to 1.5 per cent today.

It was the central bank's fourth rate increase in the last 12 months.