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Prime Rate Canada
Prime rate is the basis for pricing variable-rate mortgages in Canada, along with a variety of other financial products.
Written By Taras Trofimov
Content Manager
History of Canada's prime rate
The prime rate is the benchmark interest rate used by retail banks to price mortgages and other loans. It's influenced by the Bank of Canada’s overnight rate, which affects banks’ borrowing costs. While each bank sets its own prime rate, they historically move in unison.
The prime rate of Canadian banks has fluctuated significantly over the past 70 years.
It reached an all-time high of 22.75% in August 1981. This occurred when the Bank of Canada began frantically hiking overnight rate to control runaway inflation, which wreaked havoc on the economy. As a result, many homebuyers faced rates of more than 20% on their mortgages.
Canada’s record low prime rate was 2.25%, which occurred in April 2009, at the tail end of the 2007-2008 economic recession (also known as the Global Financial Crisis), when the Bank of Canada suddenly dropped its lending rates to near-zero to stimulate the faltering economy.
The longest period that Canada’s prime rate remained unchanged was between September 2010 and January 2015, when it sat at 3.00%.
It also remained steady during the COVID-19 pandemic (from April 2020 to March 2022), at 2.45%.
However, by July 2023, the prime rate rose to 7.20%, the highest it had been in decades, higher even than what it was during the 2007 financial crisis (it peaked at 6.25% in 2007). The reason for this was high inflation, which the Bank combated by raising the overnight rate. The silver lining is that, with the inflation being mostly reined in, the prime rate declined alongside the Bank's rate over the course of 2024 and 2025.
That said, as of Apr. 2026, the Bank's rate cuts are on hold, and it's likely that the prime rate will remain unchanged throughout most of 2026.
- Current prime rate: 4.45% (as of April 2026)
How much can the prime rate move?
In the last 20 years, the prime rate has not gone above 7.20%.
Since the early 90’s, the average rate hike cycle has resulted in prime rates that peaked about 2.30% above the low that preceded them. So, if you have a variable-rate mortgage, you should expect that your rate could go up by around 2% based on past patterns of rate hikes.
The threat of double-digit rates: Is it real?
Many point to the extreme increases in the late 1970’s and early 1980’s – when double digit interest rates on mortgages were common – as a warning of what’s possible.
However, this occurred long before the introduction of inflation targeting in 1991, a strategy the Bank of Canada implemented to help maintain lower and more stable interest rates.
In the world we live in now, debt-gorged economies could not withstand double-digit interest rates. Nor could governments with their billions in debt service obligations.
Post-pandemic rate hikes
The steepest prime rate hikes in recent memory occurred between 2022 and 2023 in the wake of the COVID-19 pandemic, peaking at 7.20% in July 2023. Over the course of 2024 and 2025, the rate declined by 275 basis points (bps), and now holds at 4.45%, with the overnight rate sitting at 2.25%.
Economic uncertainty of 2025 and 2026
Because the U.S. trade restrictions and uncertainty continuing to disrupt economic growth in Canada, there's a risk of the prime rate going up. However, as of April 2026, the inflation rate remains at 2.4% (slightly above the target of 2%), which means that the Banks's overnight rate is unlikely to climb. In fact, most Canadian economists predict that the overnight rate will hold until at least the end of 2026, meaning that the prime rate will do the same.
Canada's prime rate forecast 2026
Prime rates move in tandem with the Bank of Canada’s decisions about the benchmark overnight interest rate, the latest of which occurred on Apr. 30, 2026. Since the Bank decided to hold interest rates at 2.25%, the prime rate stands at 4.45%.
With rates trending downward, the general economic outlook suggests improved affordability for borrowers. Following a rise during the pandemic, headline inflation has since declined, reaching the Bank’s target range of 1% to 3%, where it remains in 2026., at 2.4% as of March.
Still, the outlook for Canada’s economy – and the global economy – remains highly uncertain, especially with the Canada-United States-Mexico Agreement (CUSMA) being up for review in July 2026.
One potential outcome of the review is that the U.S. enters into bilateral trade agreements with Mexico and Canada, which could do more harm to Canada's economy than the current tariffs on energy, aluminum, and automotive exports.
The broad consensus among Canadian economists is that the Bank will continue holding the rate of 2.25% throughout most, if not all, of 2026. There is a slight possibility that a cut could come in the second half of the year if the Canadian economy continues to weaken in the face of weaker manufacturing, lower trade activity, and oil price shocks. For more information, check out our full mortgage rate forecast for 2026.
- Estimated prime rate by year-end 2026: 4.45%
When will the prime rate change next?
The prime rate almost always changes when the Bank of Canada raises or lowers its overnight rate.
Also known as the Bank of Canada’s policy rate, key interest rate or target rate, overnight rate is the amount the Bank wants Canada’s largest financial institutions to charge each other when lending and borrowing in the overnight market.
The Bank delivers eight scheduled interest rate decisions per year. As of Apr. 30, 2026, the prime rate sits at 4.45% following the Bank's rate hold at 2.25%.
The Bank of Canada can also hold emergency rate meetings in times of economic crisis. It did this last in the spring of 2020, during the COVID-19 pandemic, and before that, during the global financial crisis of 2008. In both cases, the Bank’s emergency rate cuts resulted in reductions to Canada’s prime rate.
This year's scheduled dates for interest rate announcements are:
- Wed., Jun. 10, 2026
- Wed., Jul. 15, 2026
- Wed., Sep. 2, 2026
- Wed., Oct. 28, 2026
- Wed., Dec. 9, 2026
The Monetary Policy Report is published concurrently with the January, April, July and October rate announcements.
All rate announcements occur at 9:45 am EST.
Canada's prime rate (1975 – 2026)
Prime rate typically follows a parallel path with the Bank of Canada’s overnight rate. But this isn’t always the case.
For instance, when the Bank of Canada dropped its overnight target rate twice by 25 bps (or 50 bps in total) in 2015, the other banks didn’t follow suit, opting to lower the prime rate by only 0.3% to boost their earnings.
Sometimes, a bank moves its own prime rate unilaterally, as TD Canada Trust did in November 2016. TD decided to hike its mortgage prime rate from 2.70% to 2.85%, forcing its existing variable-rate customers to pay 0.15% above the official prime rate.
The current overnight rate is 2.25%, while the prime rate stands at 4.45%.
Economists from Canada’s largest banks anticipate not more cuts to the overnight rate throughout most of 2026, with the prime rate to also remain the same. However, it’s possible – though highly unlikely – that the prime rate will not follow suit so readily. For example, banks could opt to reduce their rates by smaller amounts, or not at all.
The following graph shows the movements of Canada’s prime rate over the last 40 years.
Historical quarterly trends in Canada's prime rate (1975-2026)
Frequently asked questions about Canada’s prime rate
Need more information on Canada's prime rate? We have you covered.
What is the prime rate?
Prime rate is the benchmark interest rate banks use as a reference to decide how much to charge for loans, including mortgages, personal and home equity lines of credit (HELOCs), commercial loans and credit cards. Variable rate mortgages and lines of credit are especially affected by changes to the prime rate.
Each lender sets its own prime rate, but they usually match the benchmark prime rate calculated by the Bank of Canada. That said, the prime rate is always a bit higher than the overnight rate (to mitigate risk).
What is Canada’s current prime rate?
The prime rate stands at 4.45%, while the current overnight rate is 2.25%.
How is Canada’s prime rate calculated?
The country’s official prime rate is calculated by the Bank of Canada using a mode average of the Big Six banks’ individual prime rates.
The Bank of Canada publishes the prime rate on a weekly basis, but it usually only changes when the Bank changes its policy rate.
For example, if the Bank of Canada cuts its policy rate, retail banks typically announce reductions to their individual prime rates the day after the central bank's decision.
If a majority of the retail banks adjust their individual prime rates, Canada’s official prime rate will be updated accordingly.
How does the prime rate affect variable mortgage rates?
Most lenders will quote their variable (or 'floating') rates as either a premium or a discount in relation to prime rate.
For example, you’ll generally see closed variable rates advertised at a discount, like 'prime – 0.60%.'
Open variable rates, which allow the borrower to repay the loan as quickly as they want without penalty, are typically priced much higher and are therefore quoted at a premium to prime rate, such as 'prime + 1.50%.' This goes for most HELOCs as well.
As the prime rate changes, a floating-rate borrower’s interest rate fluctuates. But that doesn’t necessarily mean their monthly payments will change.
In the case of variable-rate mortgages, borrowers can get a fixed-payment variable rate. That means when prime rate rises, the monthly payment remains the same, but the amount of the payment going towards interest increases. If interest rates fall, someone with a fixed-payment mortgage will see the interest portion of their payment decline, while more will go towards reducing the principal.
By contrast, someone with an 'adjustable-rate' mortgage will have payments that move up and down with prime rate. In other words, the amount of principal being paid never decreases, regardless of what prime rate does. That keeps your amortization (the time required to pay off your mortgage) on track.
What causes the prime rate to change?
The number one factor driving changes to prime rate is inflation expectations. The Bank of Canada is required to set monetary policy to achieve target inflation, which is within a range of 1%-3%. It typically does this by increasing or decreasing its overnight rate.
When its economic models suggest inflation is falling materially below the target range, the Bank of Canada will cut its overnight rate to stimulate more borrowing, economic activity and inflation. That generally leads to retail banks lowering their prime rate.
When the Bank expects inflation to meaningfully exceed the 2% target, it typically hikes its overnight rate, leading banks to increase their prime rate.
Taras Trofimov, Content Manager
Taras has over nine years of content marketing experience across multiple industries in B2B and B2C spaces. He has produced thought leadership content for organizations like Constellation Software, Facebook and Yellow Pages as well as outlets like Huffington Post and MSN Canada.
He graduated from York University with a Bachelor of Arts degree and studied Technical Communication at Seneca College.
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