RBC, other banks cut prime rates to 5.75 percent

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

Its competitors, including Toronto-Dominion Bank (TD.TO: Quote), Bank of Montreal (BMO.TO: Quote) and Canadian Imperial Bank of Commerce (CM.TO: Quote), 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.