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Q. How does the Bank of Canada interest rate effect credit unions in comparison to chartered banks?
A. The short answer is that banks and credit unions are affected the same by Bank of Canada interest rates.
Usually, when the Bank of Canada drops or increases its’ rate, banks and credit unions follow suit and adjust their prime rate by the same amount. On rare occasions, banks and credit unions will not follow the Bank of Canada’s lead. For example, in the recent economic downturn, some financial institutions kept their prime rate higher than that of the industry norm. It should be noted that Synergy Credit Union has maintained its prime rate equal to the broader market place.
Loan and deposit rates that are not related to prime rate are more generally impacted by Bank of Canada rate changes. These rates will react differently depending on the type of product, whether the rate is fixed or floating, and whether interest rates are expected to rise or fall over the longer term.
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