Canada Prime Rates

Bank of Canada Holds Policy Rate at 2.25%, Keeping Prime Rate Steady at 4.45%

With the Bank of Canada holding its policy rate at 2.25%, Canada’s prime lending rate remains unchanged at 4.45%. This keeps borrowing costs steady for products tied to prime, including variable-rate mortgages, HELOCs, and personal lines of credit. However, the outlook for borrowers has become more uncertain. Canada’s economy remains weak, but higher oil prices have pushed headline inflation higher, leaving the Bank of Canada cautious about cutting rates while inflation risks remain elevated.

What the Bank of Canada’s Decision Means for Prime Rates

• With the policy rate unchanged at 2.25%, major Canadian lenders continue to set their prime rate at 4.45%. Borrowers with variable-rate mortgages, HELOCs, and lines of credit should not see an immediate change in rates from this announcement.
• Inflation increased in April 2026, with CPI reaching 2.8%. The rise was mainly tied to higher energy prices and the carbon tax removal effect falling out of the 12-month inflation calculation.
• The Bank expects inflation to remain near 3% in the short term before gradually easing toward 2%, but it is watching closely for signs that energy costs are spreading into broader consumer prices.
• Canada’s economy remains soft. GDP edged down by 0.1% in the first quarter of 2026, while housing activity declined and business investment stayed weak.
• The labour market still shows slack. Employment is little changed since the start of 2026, and the unemployment rate was 6.6% in May after fluctuating between 6.5% and 7%.
• For borrowers, stable prime rates provide short-term payment stability, but the Bank’s message suggests rate cuts are not guaranteed while inflation risks remain elevated.
• For savers, deposit and GIC rates are likely to remain broadly stable in the near term, although higher inflation can reduce real returns.

The Bank of Canada’s decision to hold the policy rate at 2.25% on June 10, 2026, keeps Canada’s prime rate steady at 4.45%. For variable-rate borrowers, this means no immediate change to borrowing costs. However, the Bank is balancing two opposing risks: a soft economy that may need support and higher energy-driven inflation that could become persistent. The direction of prime-linked rates will depend on whether inflation eases back toward 2% or whether higher energy prices spread more broadly through the economy.

The Prime rate in Canada is currently 4.45%. 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. If you have any of these loans, changes in the prime rate will also change your debt payments and thus your GDS and TDS ratios.