Canada Prime Mortgage Rate
Canada’s prime rate plays a central role in how variable mortgage rates, HELOCs, and other borrowing costs are set in Canada. While the prime rate often moves in response to changes in the Bank of Canada’s policy rate, it is ultimately determined by lenders and applied to consumer lending products. For homeowners and buyers, understanding how the prime rate works is often more important than trying to predict where interest rates are headed next.
Key Takeaways
- The prime rate is the benchmark lenders use to price variable mortgages and credit lines.
- Prime rates move in response to the Bank of Canada policy rate, but are set by lenders.
- Understanding the mechanics of the prime rate matters more than short-term rate predictions for mortgage planning.
What Is the Prime Rate in Canada?
The prime rate is not set by the Bank of Canada. It is a commercial lending benchmark established by banks and mortgage lenders and applied to consumer borrowing products, including variable-rate mortgages (VRM), adjustable-rate mortgages (ARM), and home equity lines of credit (HELOC). While prime rates typically move shortly after changes to the Bank of Canada’s policy rate, lenders retain discretion over how and when those changes are passed on to borrowers.
While each financial institution, bank, and mortgage lender sets its own prime rate, Canada’s major banks usually match each other to stay competitive. The benchmark lending rate typically moves in lockstep with the Bank of Canada’s policy interest rate, the central bank’s benchmark for short-term (overnight) loans between financial institutions.
Current Prime Rate in Canada
As of January 30, 2026, the prime rate in Canada is 4.45% across all major banks and lenders, including RBC, TD, BMO, Scotiabank, CIBC, and National Bank. TD Bank continues to list a higher rate (4.45% + 0.15%) specifically for its variable mortgage products.
The current prime rate has remained steady since the Bank of Canada last adjusted its policy rate to 2.25%, reflecting a cautious stance amid economic uncertainty and growing core inflation.
Prime Rate History in Canada and Why It Matters for Borrowers
Prime rate history is less about predicting future rates and more about understanding how quickly borrowing costs can change. Periods of stability have often been followed by sharp increases or rapid cuts, which is why mortgage structure and risk tolerance matter as much as the headline rate itself.
Canada’s prime rate has changed dramatically over time, shaped by inflation cycles, economic shocks, and central bank policy. While historical data does not predict future rates, it clearly shows how quickly borrowing costs can rise or fall. For mortgage borrowers, this history reinforces an important lesson: managing interest rate risk is often more important than trying to time rate movements.
Early Years and Post-War Stability 1935 to the 1960s
When the Bank of Canada was established in 1935, interest rates were relatively low and stable by today’s standards. The prime rate during this period generally remained in the low single digits, reflecting a tightly regulated financial system and slower economic growth. Borrowing costs were predictable, and long periods of rate stability were common.
Inflation Shocks and Extreme Volatility 1970s to Early 1980s
The 1970s and early 1980s marked the most volatile period in Canada’s prime rate history. Surging inflation, global oil shocks, and aggressive monetary tightening pushed the prime rate above 20% in 1981. This stagflationary period illustrates how quickly borrowing costs can rise when inflation becomes entrenched, creating severe affordability strain for homeowners and businesses.
Disinflation and Policy Discipline 1990s to Mid-2000s
Following the inflation crisis, the Bank of Canada adopted formal inflation-targeting in the early 1990s. This shift in monetary policy helped stabilize both inflation and interest rates over time. During this period, the prime rate moved within a more moderate range, reinforcing the role of monetary policy credibility in reducing extreme rate swings.
Financial Crises and Emergency Rate Cuts 2008 to 2017
The global financial crisis triggered rapid and aggressive rate cuts, pushing the prime rate to historically low levels. Subsequent economic shocks, including the oil price collapse in the mid-2010s, kept rates lower for longer. This period of uncertainty showed how quickly Canada’s monetarypolicy can shift in response to systemic risk.
Pandemic, Inflation, and Rapid Tightening 2020 to 2024
During the pandemic, emergency stimulus pushed the prime rate to record lows. This period was followed by one of the fastest tightening cycles in Canadian history as inflation surged. The prime rate rose sharply, underscoring how quickly variable borrowing costs can change when economic conditions shift.
What Prime Rate History Teaches Mortgage Borrowers
Prime rate history shows that long periods of stability can be interrupted suddenly by sharp increases or cuts. For mortgage borrowers, this underscores the importance of selecting a mortgage structure that aligns with income stability, risk tolerance, and long-term financial plans. History favours preparation over prediction.
The table below shows recent changes to Canada’s prime rate and illustrates how quickly borrowing conditions can shift.
Bank of Canada Interest Rate Changes
| Date of Rate Change | Key Overnight Target Rate (%) | Change (%) | Bank Prime Rate |
|---|---|---|---|
| June 2, 2010 | 0.30% | 0.25% | 2.50% |
| July 21, 2010 | 0.55% | 0.25% | 2.75% |
| September 9, 2010 | 0.80% | 0.25% | 3.00% |
| January 28, 2015 | 0.65% | -0.15% | 2.85% |
| July 16, 2015 | 0.50% | -0.15% | 2.70% |
| July 13, 2017 | 0.75% | 0.25% | 2.95% |
| September 7, 2017 | 1.00% | 0.25% | 3.20% |
| January 18, 2018 | 1.25% | 0.25% | 3.45% |
| July 12, 2018 | 1.50% | 0.25% | 3.70% |
| October 25, 2018 | 1.75% | 0.25% | 3.95% |
| March 5, 2020 | 1.25% | -0.50% | 3.45% |
| March 17, 2020 | 0.75% | -0.50% | 2.95% |
| March 30, 2020 | 0.25% | -0.50% | 2.45% |
| March 3, 2022 | 0.50% | 0.25% | 2.70% |
| April 14, 2022 | 1.00% | 0.50% | 3.20% |
| June 2, 2022 | 1.50% | 0.50% | 3.70% |
| July 14, 2022 | 2.50% | 1.00% | 4.70% |
| September 7, 2022 | 3.25% | 0.75% | 5.45% |
| October 26, 2022 | 3.75% | 0.50% | 5.95% |
| December 7, 2022 | 4.25% | 0.50% | 6.45% |
| January 25, 2023 | 4.50% | 0.25% | 6.70% |
| March 8, 2023 | 4.50% | 0.00% | 6.70% |
| April 12, 2023 | 4.50% | 0.00% | 6.70% |
| June 7, 2023 | 4.75% | 0.25% | 6.95% |
| July 12, 2023 | 5.00% | 0.25% | 7.20% |
| September 6, 2023 | 5.00% | 0.00% | 7.20% |
| October 25, 2023 | 5.00% | 0.00% | 7.20% |
| December 6, 2023 | 5.00% | 0.00% | 7.20% |
| January 24, 2024 | 5.00% | 0.00% | 7.20% |
| March 6, 2024 | 5.00% | 0.00% | 7.20% |
| April 10, 2024 | 5.00% | 0.00% | 7.20% |
| June 5, 2024 | 4.75% | -0.25% | 6.95% |
| July 24, 2024 | 4.50% | -0.25% | 6.70% |
| September 4, 2024 | 4.25% | -0.25% | 6.45% |
| October 23, 2024 | 3.75% | -0.50% | 5.95% |
| December 11, 2024 | 3.25% | -0.50% | 5.45% |
| January 29, 2025 | 3.00% | -0.25% | 5.20% |
| March 12, 2025 | 2.75% | -0.25% | 4.95% |
| April 16, 2025 | 2.75% | 0.00% | 4.95% |
| June 4, 2025 | 2.75% | 0.00% | 4.95% |
| July 30, 2025 | 2.75% | 0.00% | 4.95% |
| September 17, 2025 | 2.50% | -0.25% | 4.70% |
| October 29, 2025 | 2.25% | -0.25% | 4.45% |
| December 10, 2025 | 2.25% | 0.00% | 4.45% |
| January 28, 2026 | 2.25% | 0.00% | 4.45% |
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What Influences the Prime Rate in Canada?
The most critical factor influencing Canada’s prime rate is the Bank of Canada’s target for the overnight policy rate, often referred to as the policy interest rate, or simply the policy rate. When the Bank raises its policy rate, it becomes more expensive for banks to borrow from each other. They then pass on the interest cost to their clients by increasing their prime lending rate.
Since 2015, the spread between the Bank of Canada’s policy rate and the prime rate has typically been around 2.20%. While this relationship has been relatively consistent, it is not guaranteed. Banks are not legally required to match the policy rate exactly, which is why understanding lender behaviour matters for borrowers.
Example: If the BoC policy rate is 2.25%, most banks will set their prime rate around 4.45%, which is a difference of 2.20%.
How Does the Prime Rate Affect Mortgage Rates?
For mortgage qualification, lenders assess borrowers using gross income and stress-tested payments, not net income. Prime rate changes affect affordability over time, but qualification is based on qualifying rates and debt-service ratios at the time of approval.
Variable-rate mortgages are directly tied to the prime rate. When you’re offered a variable mortgage loan, the interest is usually quoted as:
Prime Rate ± a spread (delta)
Example: Prime – 0.60% = Mortgage Rate
When the prime rate rises or falls, your mortgage rate adjusts accordingly, impacting your amortization and interest portion of each payment.
Variable Mortgages and the Prime Rate
Most lenders offer variable mortgages at a discount to the prime rate (e.g., Prime – 0.25% or Prime – 0.60%). The better your credit score and down payment, the more favourable your rate may be. However, you may still get a better rate discount on a high-ratio mortgage even though you’ll need a lower downpayment, as it carries less risk for the lender.
Fixed vs Variable Rate Strategy in a Changing Environment
Choosing between fixed and variable mortgage rates depends on two key factors: your outlook on interest rates and your ability to absorb risk.
If you’re uncertain, mortgage lenders typically offer convertible mortgages. This feature allows you to switch your adjustable-rate mortgage (ARM) or variable-rate mortgage (VRM) into a fixed-rate mortgage before it matures, without incurring a penalty.
Historical context enables borrowers to make smarter decisions. In periods of rapid hikes, fixed rates offer peace of mind. However, during rate pauses or cuts (like the current one), variable interest rates may become more appealing, especially when paired with prepayment flexibility or low penalties. If you’re planning to renew or refinance, comparing variable vs fixed rates can result in substantial savings over the term.
Here’s how fixed and variable rates perform in a changing rate environment:
- Fixed Rates: Ideal when rates are expected to rise. You lock in a predictable rate and monthly payment over the mortgage term.
- Variable Rates: More attractive when rates are falling or holding steady. These typically start lower than fixed rates, but depending on the type of variable mortgage, mortgage payments (ARM) or interest-carrying costs (VRM) may fluctuate over time.
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How Borrowers Should Think About Prime Rate Risk
Indeed, lower mortgage rates are good news for borrowers with variable-rate mortgages or HELOCs. However, if you’re considering switching to a fixed mortgage, now may be a good time, as fixed mortgage rates are expected to increase over the long term.
Canada’s central bank policy is data-driven, so if inflationary price increases unexpectedly rebound, future cuts could be delayed. That’s why it’s essential to have a mortgage strategy that aligns with both unique needs and long-term goals.
Canadian vs US Prime Rates
The US prime rate currently sits at 7.50%, while the Canadian prime rate is 4.45%. This gap is more than just a number; it highlights the differences in how the Bank of Canada (BoC) and the US Federal Reserve (Fed) respond to inflation, growth, and financial stability.
In the United States, the Fed sets the Federal Funds Rate (FFR), which guides the prime rate that banks charge their most creditworthy clients. In Canada, the equivalent benchmark is the BoC policy interest rate, which drives the prime rate used by banks and lenders here at home. While both countries adjust rates to control inflation and encourage sustainable growth, the timing and scale of their moves often diverge.
Several factors explain why the US prime rate is higher than Canada’s:
- Inflation pressures have been stickier in the US, requiring more aggressive rate hikes.
- Economic resilience south of the border has allowed the Fed to maintain higher borrowing costs without tipping the economy into recession.
- Currency dynamics also play a role, as central banks consider the exchange rate when setting monetary policy to protect their economies from imported inflation.
For Canadians, these differences matter. Higher US prime rates can strengthen the US dollar against the Canadian dollar, making imports more expensive and sometimes influencing how the BoC sets its own monetary policy. For borrowers, understanding these cross-border dynamics helps explain why mortgage rates in Canada may not always follow the exact path of US rates.
Ultimately, while the two central banks aim for price stability, their policy tools, economic backdrops, and inflation realities differ. This means Canadian borrowers need to watch both the BoC and the Fed when planning for future mortgage costs.
Frequently Asked Questions (FAQ) About the Canadian Prime Rate
What is Canada’s current prime rate?
As of January 30, 2026, Canada’s prime rate is 4.45% at all major banks.
How often does the prime rate change?
The prime rate changes when the Bank of Canada adjusts its target for the overnight policy rate, which can occur up to 8 times per year. The policy rate as of January 30, 2026 is currently 2.25%.
Does the prime rate affect mortgage rates in Canada?
The prime rate directly affects variable-rate mortgages, HELOCs, and many lines of credit, as their pricing is directly tied to the prime rate. Fixed rates are affected by bond yield movements, indirectly influenced by changes to the BoC policy rate.
Do all banks have the same prime rate?
Typically, all banks in Canada adjust their prime rates one to two days after the Bank of Canada changes its policy rate. TD uses a different prime rate for their variable mortgage products.
How should borrowers think about future prime rate changes?
Future changes to Canada’s prime rate depend on inflation trends, economic growth, and decisions by the Bank of Canada. While short-term moves are difficult to predict, borrowers can manage uncertainty by choosing a mortgage structure that aligns with their risk tolerance, income stability, and time horizon. Planning for rate fluctuations is often more effective than trying to time rate changes.
Final Thoughts
Understanding how the prime rate works gives borrowers more control over their mortgage decisions, regardless of where interest rates move next. Prime rate mechanics, lender behaviour, and mortgage structure ultimately matter more than short-term rate predictions. Clear knowledge at this stage supports better planning and more resilient homeownership outcomes.
If you’re unsure whether to lock in a fixed rate or ride the wave with a variable, nesto mortgage experts can help you make a decision. We’ll assess your financial profile, rate outlook, and mortgage timeline to help you set up a personalized, cost-effective plan for the years ahead.
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