What is a Prime Rate?

Prime Rate is a type of interest rate that big banks and other lenders use for lending purposes. Examples of a prime rate are seen in such mortgage products such as variable rate mortgages, credit cards, secured and unsecured lines of credits or HELOCs referred to as Home Equity Lines of Credit. 

The Prime Interest Rate usually changes as the Bank of Canada’s overnight target rate changes. As a result, the Bank's Prime Rates changes in accordance with that of the central banks'.

Most lenders in Canada use the same prime lending rate  with an exception of TD Bank who tends use a different Prime Rate.  A Prime Rate will usually affect variable rate mortgages and other variable rate products like lines of credit.

What is Prime Rate today?
Prime Rate is currently 3.95%.
TD Bank's Prime Rate is 4.10%

Why does Prime Rate keep changing?
​What influences it?
"Prime Rate" is influenced by the Bank of Canada's overnight lending rate. Lately, the Bank of Canada is concerned that inflation is on the rise and therefore, has set out to meet a target rate. As a result, we will see Prime Rate most likely continue to rise in line with the rise of inflation.

On the flip side, when the Bank of Canada lowers the overnight lending rate, it naturally reduces Prime Rate. It does this when it's concerned that inflation is decreasing or is moving towards disinflation.

Where is Prime Rate Headed?

Most economists as well as Bank of Canada itself have indicated that it would like to meet a target rate of around 4.5% to 6% by 2021. Therefore, we can expect the overnight lending rate and subsequently the Prime Rate to continue to rise.