Prime Rate
The base interest rate each Canadian lender charges its most creditworthy customers, typically set about 2.00% above the Bank of Canada Policy Rate.
Prime Rate is the benchmark interest rate each Canadian lender sets for its most creditworthy customers. By convention, Canada's Big 5 banks hold Prime approximately 2.00 percentage points above the Bank of Canada's overnight target rate, though the exact spread can vary slightly by lender and has drifted modestly over time. When the BoC adjusts its overnight target, Canada's Prime Rate typically follows within 24 hours. Prime directly sets variable-rate mortgages, HELOCs, and unsecured lines of credit. A 'Prime minus 1.00%' variable mortgage, for example, adjusts immediately when Prime moves. Fixed-rate mortgages are not affected by Prime — they're priced off Government of Canada bond yields.
Related Terms
The overnight target rate set by the Bank of Canada — the single most important interest rate in the Canadian economy.
A mortgage where the interest rate is tied to Prime Rate and moves with every Bank of Canada Policy Rate decision.
A revolving credit line secured against your home's equity, priced as Prime plus a spread — typically 0.50% to 1.00% above Prime.