Canada Prime Rates

This Page's Content Was Last Updated: July 15, 2022

Today's Prime Rate:5.45%

As of Today, September 26th, 2022

Current Bank Prime Rates

BankPrime Rate
TD
TD
5.45%*
RBC
RBC
5.45%
CIBC
CIBC
5.45%
BMO
BMO
5.45%
Scotiabank
Scotiabank
5.45%
National Bank
National Bank
5.45%
* Toronto-Dominion (TD) Bank uses a different Prime rate for its variable rate mortgage products. As of September 2022, that rate was 5.60%.

Prime Rates in Canada

The Prime rate in Canada is currently 5.45%. The Prime rate is the interest rate that banks and lenders use to determine the interest rates for many types of loans and lines of credit. These can include credit cards, HELOCs, variable-rate mortgages, car and auto loans, and much more.

Best 5-Year Variable Mortgage Rates in Canada
CanadaLeaf
more calculators button
CIBC
CIBC
5.14%
BMO
BMO
5.20%
TD
TD
5.20%
RBC
RBC
5.25%
Scotiabank
Scotiabank
5.65%
more calculators button

Prime Rate and Bank of Canada Overnight Rate
(1935 - 2022)

Latest Update: September 7, 2022

Borrowers Brace for Another 0.75% Rate Hike as Prime Rates Soar

Borrowers are in for another setback after the Bank of Canada announced yet another 0.75% rate hike on September 7, 2022. This brings the Bank of Canada’s policy rate to 3.25% and will cause Canadian prime rates to increase to 5.45%.

Here’s what you should know about the Bank of Canada’s latest rate announcement:

  • Prime rates will rise at Canada’s major banks to 5.45%, up 75 bps from the current prime rate of 4.70%.
  • Inflation remains elevated despite dipping slightly to 7.6% in July 2022.
  • Canada’s unemployment rate remained at a record low of 4.9% in July 2022.
  • Quantitative tightening (QT) began on April 25, 2022. This will gradually reduce the Bank of Canada’s balance sheet and cause upward pressure on fixed mortgage rates.
  • Housing prices in Canada have slumped in many markets across the country over recent months, in response to the rising cost of borrowing and slowing demand.

The cost of borrowing in Canada is set to increase once again as the Bank of Canada hikes its policy interest rate to become the highest out of the G7 countries. That’s because an increase in the Bank of Canada’s policy interest rate will mean that prime rates at Canada’s major banks will also increase. This month’s 0.75% rate hike was prompted by an inflation rate that continues to be persistently high despite easing slightly in July 2022.

Prime rates will rise to 5.45% at Canada’s major banks, which will have an immediate impact on those with variable-rate mortgages, HELOCs and lines of credit. Meanwhile, sales and home prices in Canada’s housing market have slipped over the past few months as interest rates soar. Further rate hikes will continue to cool prices and dampen demand across the country. However, slowing inflation, as indicated in the July 2022 CPI release, may allow for a more relaxed rate hike schedule going forward.

RBC's interest rate forecast in June 2022 predicted that the Bank of Canada's policy rate would end the year at 2.50%. RBC’s August 2022 forecast now predicts the policy rate to be 3.50% by Q4 2022. That would translate to a prime rate of 5.70% by year’s end and require at least another rate hike of 0.25%. The next interest rate announcement will be on October 26, 2022, at 10 a.m. ET.

Canada Prime Rate Changes Since 2010

Effective DateTarget Overnight RateChange

Canada Bank Prime Rates

RBC Royal Bank

RBC Royal Bank Prime Rate

RBC Royal Bank's Prime rate is currently 4.7%
RBC Royal Bank's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

Scotiabank

Scotiabank Prime Rate

Scotiabank's Prime rate is currently 4.7%
Scotiabank's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

TD Bank

TD Bank Prime Rate

TD Bank's Prime rate is currently 4.7%
TD Bank's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

CIBC

CIBC Prime Rate

CIBC's Prime rate is currently 4.7%
CIBC's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

BMO Bank of Montreal

BMO Bank of Montreal Prime Rate

BMO Bank of Montreal's Prime rate is currently 4.7%
BMO Bank of Montreal's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

HSBC

HSBC Prime Rate

HSBC's Prime rate is currently 4.7%
HSBC's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

National Bank

National Bank Prime Rate

National Bank's Prime rate is currently 4.7%
National Bank's Prime rate was changed to 4.7% from 3.7% on July 14, 2022

Explanation of the Prime Rate

Who Sets the Prime Rate?

Each bank or lender determines their own Prime rate. Banks in Canada usually look to the target overnight rate, or the Policy Interest Rate set by the Bank of Canada (BoC). Changes in the target overnight rate are usually followed by similar changes in Prime rates. As a result, most banks and lenders in Canada have similar Prime rates.

How the Prime Rate Affects You

If you borrow money, you are affected by the Prime rate. The interest rates of many lending products are based off the Prime rate and may go up or down when the Prime rate changes.

Credit Cards

Some credit cards set their interest based on the Prime rate. Because they are not backed by an asset like a house or car, they are unsecured and will usually have high interest rates to make up for the additional risk. RBC's RateAdvantage Visa, for example, has an interest rate of "Prime + 4.99%" to "Prime + 8.99%".

Other variable rate credit cards include TD's Emerald Flex Rate Visa and National Bank's Syncro Mastercard.

Home Equity Line of Credit (HELOC)

HELOCs are almost always variable rate and based on the Prime rate. A common delta for HELOCs is +0.50%. This is described as "Prime + 0.50%" or "P + 0.50%". If the current Prime rate is 4.70%, then the rate for a HELOC at "Prime + 0.50%" would be 5.20%.

Variable Rate Mortgages

Variable rate mortgages are offered by many lenders and their interest rates are based on the Prime rate. These mortgages are "variable rate" because their interest rates can change if the Prime rate changes. Your rate will depend on your specific mortgage, property, and financial situation. Having a good credit score and mortgage insurance can usually get you the lowest mortgage rates.

TD Bank uses a different Prime rate for its mortgages. It is currently set to 3.35% compared to its regular Prime rate of 4.70%.

Car and Auto Loans

Some car and auto loans have variable interest rates that are based on the Prime rate. Although they are considered secured loans, they usually have higher interest rates than mortgages. Some car dealers and manufacturers may offer special promotions, however, for low or even zero interest rates.

Prime Rate and Variable Interest Rates

When you apply for one of these variable rate loans and financial products, the interest rate will be set to the Prime rate plus or minus a number called a delta. You can think of this as a markup or discount. Although all variable rates are based on Prime, lenders can choose to set their own markup or discount based on the type of loan and the credit-worthiness of the borrower. Borrowers with a good credit score might have access to prime rates, while those with poor credit scores would have higher rates. If you have a low credit score, you might need to get a subprime mortgage from a private mortgage lender.

Variable interest rates are normally described as "Prime" plus or minus a delta (the markup or discount). This delta is usually expressed in percentage points. An example variable rate with a delta of 1% would be described as "Prime + 1%". Prime can also be abbreviated as "P" and be described as "P + 1%".

What kind of rate and delta you get depends on many factors including the type of loan or financial product you are applying for, your credit score, and your financial situation. Riskier financial products like unsecured credit cards will tend to have large positive deltas and higher rates whereas secured loans like mortgages and HELOCs will have lower rates and small or even negative deltas.

Best 5-Year Variable Mortgage Rates in Canada
CanadaLeaf
more calculators button
CIBC
CIBC
5.14%
BMO
BMO
5.20%
TD
TD
5.20%
RBC
RBC
5.25%
Scotiabank
Scotiabank
5.65%
more calculators button

How Does the Prime Rate Impact Variable Mortgage Rates?

If you have or are considering getting a variable rate mortgage, it is important to know how changes in the Prime rate can affect your mortgage's interest rate.

Existing and Pre-approved Mortgages

If you already have or have been pre-approved for a variable rate mortgage, your mortgage interest rate has been fixed at the Prime rate plus or minus a certain rate. Your mortgage interest will then directly follow the Prime rate up or down.

For example, if your variable rate mortgage is set at Prime + 0.2% and the current Prime rate is 4.70%, then your current mortgage rate is 4.90%. If the Prime rate goes up by 0.20 percentage points to 4.90%, then your mortgage rate will increase by the same amount to 4.90% (5.10% + 0.20%).

Most variable rate mortgages have fixed payments. This means that even if your interest rate changes, your regular payments will stay the same. However, the amount of money from each payment that goes to pay off interest and the amount of money that goes towards your principal will change.

The Prime Rate Increases

If the Prime rate goes up, your mortgage rate wil increase and more of your payment will go towards interest and less will go towards your mortgage principal. This could mean that you pay off your mortgage slower and end up with more of your mortgage remaining at the end of your term.

The Prime Rate Decreases

if the Prime rate goes down, your mortgage rate will decrease and less of your payment will go towards interest and more will go towards your mortgage principal. This could mean that you pay off your mortgage faster and end up with less of your mortgage remaining at the end of your term.

Future Mortgages

If you plan to consider a variable rate mortgage in the future, you should know how the Prime rate affects your potential mortgage rate. As a variable rate, your potential mortgage rate will follow the Prime rate up and down. An increase in the Prime rate could make a variable rate mortgage more expensive than a similar fixed rate mortgage. Similarly, a decrease in the Prime rate could make a variable rate mortgage cheaper than a similar fixed rate mortgage.

Although variable rate mortgages are all based on the Prime rate, there is a modifier that lenders can set. This modifier determines how much higher or lower the variable rate is relative to the Prime rate. Think of it like a markup or discount - everybody uses the same original price, but lenders can set their own prices with a markup or discount. Even if the Prime rate goes down, lenders can choose to set a larger markup so their variable rates don't change.

This happened in March, 2020 when the banks followed the Bank of Canada's rate cut and dropped their Prime rates from 2.95% to 2.45%. Some banks including RBC and BMO then increased the markup on their variable rate mortgages so that their final rates stayed the same. This shows that you always have to do your research and check if you're really getting a good deal.

The Prime Rate and Bank of Canada Target Overnight Rate

The Prime rate has a very close relationship with the Bank of Canada target overnight rate. Since the late 1990s, the Prime rate has stayed within a 50 basis point range around 200 basis points (2 percentage points) above the Bank of Canada rate. In the US, the WSJ's Prime rate index has stayed exactly 300 basis points above the Federal Reserve's Fed Funds Rate for the past two decades.

Why Does the Prime Rate Follow the Bank of Canada Target Overnight Rate?

One major reason why the Prime rate tends to follow the Bank of Canada target overnight rate is because the rate influences a bank's cost of funds, or the amount of money they have to pay in order to get cash. Banks lend to each other using the overnight rate.

If the overnight rate goes down, the banks' cost of funds also goes down. With cheaper cash, the banks can pass on the savings to their customers by lowering their Prime rate in order to remain competitive with other lenders.

If the overnight rate goes up, the banks' cost of funds also goes up. Since they have to pay more for their cash, the banks have to raise their Prime rate.

How the Overnight Rate Works

Prime Rates’ Relationship With the Bank of Canada’s Overnight Rate

It's important to note that banks, credit unions, and other lenders all set their own prime rate. They are not necessarily forced to have the same prime rate as other banks, and they do not have to increase or decrease their prime rate to match the Bank of Canada's overnight rate changes. However, competitive pressure may force them to stay in line with their competitors.

One example of this was seen during the Bank of Canada's rate cuts in early 2020 as a response to the pandemic. On March 15, 2020, the BoC announced a rate cut of 0.50 percentage points. As an example, let's take a look at MCAP, a residential mortgage lender, and ICICI Bank, which both display their prime rate history to the public.

On March 18, 2020, ICICI Bank cut its prime rate by 50 percentage points to 2.95%. However, MCAP cut its prime rate by 50 percentage points to 2.95% on April 1, 2020, which is two weeks later. Banks and lenders do not always change their prime rates at the same time.

Another clear example is with the rate cuts by the BoC in 2015. On January 21, 2015, the BoC had a rate cut of 0.25 percentage points. However, the major banks only cut their prime rates by 0.15 percentage points. For example, RBC, TD, and the rest of Canada’s Big 5 Banks cut their respective prime rates from 3.00% to 2.85%.

Sometimes the banks do not fully pass on all of the rate savings. In this example, an additional 10 basis points were kept by the banks. The banks and lenders can set their own prime rates, and history shows that they do at times deviate from the Bank of Canada.

The Spread Between Prime Rates and the Overnight Rate

The Bank of Canada released a staff technical report in 1994 that looked at the spread between the Bank of Canada's overnight rate, the Bank rate, and prime rates. The authors found a relationship of the Prime Rate being:

Prime Rate = 1.25 + (0.25 x 30-Day Bankers' Acceptance Rate) + (0.75 x 90-Day Commercial Paper Rate)

If we were to use Canadian Bankers’ Acceptance Rates as of May 2022 of 1.19251% for 30-day and 1.76973% for 90-day:

Prime Rate = 1.25 + (0.25 x 1.19251) + (0.75 x 1.76973)

Prime Rate = 1.25 + (0.2981275) + (1.3272975)

Prime Rate = 2.875425%

More specifically, this is the implied steady state, and it is lower than the current prime rates at major banks as of May 2022, which was 3.20%. This is because the report notes that it can take a few days to several weeks for this implied prime rate to change after a change in the Bank of Canada’s overnight rate. While the data may have changed since 1994, this does give a good glimpse of the relationship between prime rates and the BoC's overnight rate.

Spread Between Prime Rates and Market Rates

January 1982 - June 1990July 1990 - August 1993
90-Day Commercial Paper Rate+1.22%+0.98%
30-Day Bankers’ Acceptance Rate+1.35%+1.03%
BoC Bank Rate+1.19%+0.87%
BoC Overnight Rate+1.39%+0.93%
Find Bank of Canada Rate Changes

Bank of Canada History

The Beginnings of Canada's Central Bank in 1935

The Bank of Canada was created as part of the Bank of Canada Act in 1935. It was recommended by the Royal Commission in response to the economic conditions of the Great Depression. In March 1935, the Bank of Canada was opened to the public as a private institution with shares sold to public investors. It was quickly nationalized as a public institution by an amendment to the Bank of Canada Act in 1938.

1935 - 1945: The Great Depression and World War II

The Bank of Canada rate (not officially the target overnight rate until much later in the century) started at 2.5% in 1935 and ended at 1.5% in 1945. The economy strengthened during the war as Canada played a vital role in supplying natural and manufactured resources to the Allies. There was also increased employment, especially of women. The decrease in the Bank of Canada rate encouraged people and businesses to borrow money to invest in new manufacturing plants and housing.

1935 - 1955: The Post-War Period

After World War II, the Bank of Canada rate did not rise until October 1955, when it was changed to 2.0%. This low-interest rate environment promoted investment in new infrastructure, manufacturing, housing and consumer goods.

1977 - 1991: Stagflation

After the upward change in 1955, the Bank of Canada rate continued to rise slowly throughout the 1960s and early 1970s. In October 1978, the benchmark rate hit double digits for the first time at 10.25%. This was due in part to the global oil crisis and the OPEC oil embargo. With record-high prices for oil in August 1980 that continued into 1981, the Bank of Canada rate hit an all-time high of 20.03% in August 1981. The lowest rate reached during this period was 7.14% (March 1987).

1991 - 2008: Economic Recovery

After the recession of the 1980s, the Bank of Canada rate between 1991 – 2009 generally went downwards with only a few exceptions. The inflation-target rate was introduced at the beginning of this period.

2009 - 2017: The Great Financial Crisis

In March 2009, the BOC rate dipped below 1% for the first time to 0.5% in response to the Great Financial Crisis. Despite a minor recovery, in 2014, oil prices dropped a staggering 60%, causing a recession in Canada's oil-driven export economy. The Bank of Canada rate then dropped from 1.25% to 0.75% in 2015.

2018-Present: Low Inflation and COVID-19

Despite widespread economic growth, 2018 and 2019 were marked by continued low inflation, preventing the Bank of Canada from raising rates any higher than 1.75%. This was quickly reversed with two 50 basis point drops in March 2020 due to the impact of COVID-19. The Bank of Canada rate lied near its lower limit at 0.25% throughout the rest of 2020 and 2021 as the deflationary impact of reduced consumer spending prevailed. As the economy recovered, the Bank of Canada began to raise rates again in early 2022.

Prime Rate in 2018: 3.45% to 3.95%

Canada's Prime rate in 2018 rose from 3.45% to 3.95% as the Bank of Canada raised its target overnight rate from 1.25% to 1.75%. Global economic growth was projected to be strong at 3.75% for the year and Canada's economy ran at near capacity with rising housing markets and high oil prices. Combined with a lower Canadian dollar, inflation was edging above the Bank of Canada's target of 2%. In response to inflation and strong economic growth, the Bank of Canada raised interest rates to keep inflation within their target range.

Prime Rate in 2019: Stable at 3.95%

Canada's Prime rate in 2019 remained stable at 3.95% as the Bank of Canada maintained its target overnight rate at 1.75%. Despite increasing asset prices with the S&P/TSX Composite index growing 19% in 2019 and stable global economic growth, pressures from Canada's lagging energy sector and uncertain trade relationships with US and China created a headwind to further tightening of monetary policy and rising interest rates.

Prime Rate in 2020: Crash to 2.45%

Canada's Prime rate in 2020 quickly dropped to 2.45% by the end of the first quarter as the Bank of Canada lowered its target overnight rate from 1.75% to 0.25% in response to economic pressures caused by COVID-19. Canada's GDP fell by by 7.5% in March followed by a record-breaking 11.6% in April. The Bank of Canada signalled that they did not expect to raise rates until at least 2023 .

Prime Rate in 2021: Looking Upwards from 2.45%

Canada's prime rate in 2021 was stable for the year, but there were increasing signals for an increase as soon as early 2022. Canada's economic recovery had exceeded the Bank of Canada's initial expectations, prompting the BoC to initially signal for a rate hike and tighter monetary policy in mid-2022. Inflation in 2021 had also reached beyond the BoC's 2% target range, which added additional pressure to the BoC to raise rates. However, the Bank of Canada did not raise rates in 2021.

Prime Rate in 2022: Rising Rates & Rising Inflation

High inflation, record-high housing prices, and rising cost of living has been the running backdrop to Canada’s recovery from COVID-19. The Bank of Canada started off the year with a 25 basis point rate hike in March 2022. This was quickly followed by another 50 basis point rate hike in April 2022, the largest single rate hike in over 20 years. Prime rates will continue to rise throughout 2022 as interest rates soar. It’s expected that the prime rate in Canada will be over 4% by the end of the year.

Canada Prime Rate Forecast 2022

The Bank of Canada began to increase its target overnight rate in early 2022. It’s expected that the Bank of Canada’s target overnight rate will reach at least 2.00% by the end of 2022. As a result, Canadian bank prime rates will likely be at least 4.20% by the end of the year. That’s a significant change from the 2.45% prime rate seen at the start of the year.

Next Bank of Canada Meeting Date: October 26th, 2022

The Bank of Canada is scheduled to meet on October 26th, 2022 to review its Target Overnight Rate. If it chooses to change the Target Overnight Rate, bank Prime rates will likely follow in the same direction.

Bank of Canada Meeting Schedule for 2022

Prime Rates in the United States

Prime Rates in the US are similar to those in Canada. They are the base rate used by banks to determine the interest rate for loans to borrowers with good credit. They also follow the overnight rate set by central banks - in the case of the US, that would be the US Federal Reserve. In contrast to Canada, the US banking sector is diverse and distributed amongst thousands of banks. Subsequently, Prime rates in the US can vary significantly from bank to bank and region to region.

The Wall Street Journal (WSJ) publishes a Prime rate index that follows the base rate on corporate loans by at least 7 of the 10 largest US banks.

As of July 2022, the WSJ's Prime Rate Index is at 4.75%

The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.