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The cost of loans linked to the big bank prime rates are headed higher in the wake of the Bank of Canada’s decision to raise its key interest rate target by a quarter of a percentage point.

The Royal Bank of Canada, Bank of Montreal, CIBC and Scotiabank say they are raising their prime rates by a quarter of a percentage point in the wake of the central bank decision.

The Canadian banks each raised their prime lending rates to 3.95 per cent from 3.70 per cent, effective Thursday.

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Read more: Bank of Canada raises key rate again, hints at more frequent increases ahead

Read more: BoC rate increase piles more pressure on overburdened households (Rob Carrick)

The increase raises the cost of loans with interest rates linked to the prime rate such as variable-rate mortgages and home equity lines of credit.

TD Canada Trust also hiked its prime rate by a quarter of a percentage point to 3.95 per cent and its mortgage prime rate by the same amount to 4.10 per cent.

The Bank of Canada raised its key interest rate target by a quarter of a percentage point to 1.75 per cent.

It was the fifth time since the summer of 2017 that the central bank has raised the trend-setting rate.

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