Prime Rate
Quick Definition
The base lending rate banks use, tied to the Bank of Canada overnight rate.
Full Explanation
The prime rate is the benchmark interest rate that Canadian commercial banks use to set interest rates for variable-rate loans, lines of credit, and mortgages. It moves in lockstep with the Bank of Canada's overnight target rate — when the BoC raises or lowers rates, the prime rate typically follows within days. As of 2024, Canada's prime rate is approximately 7.20%. Variable-rate mortgage holders and those with home equity lines of credit (HELOCs) are directly affected by changes to the prime rate.
Related Terms
Interest Rate
The percentage charged on the principal loan balance per period.
Variable Interest Rate
An interest rate that fluctuates based on the prime rate.
HELOC (Home Equity Line of Credit)
A revolving credit line secured by your home equity, up to 80% LTV.
Bank of Canada
Canada's central bank, responsible for monetary policy and setting the overnight rate.
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