What is it?
The prime rate is the number a bank publishes as its base lending rate. Loans whose rate moves over time, such as variable-rate mortgages, HELOCs (home equity lines of credit), some lines of credit and car loans, are priced from this prime.
Prime is not set by the government or by the Bank of Canada (the central bank). Each bank sets its own prime, and no law fixes a formula. In practice, the big banks usually match each other on the same day with the same number.
Prime does not mean a rate only the best customers get. Your actual rate is prime minus or plus a number set in your contract.
What is prime right now?
On October 28, 2026 the Bank of Canada raised its policy rate from 2.25% to 2.50%, and bank prime rates rose the next day. These values were checked on October 30, 2026.
| Date | Bank of Canada policy rate | Prime rate | Gap |
|---|---|---|---|
| October 28, 2026 (before the increase) | 2.25% | 4.45% (Bank of Canada Daily Digest) | 2.20 percentage points |
| October 29, 2026 (after the increase took effect) | 2.50% | 4.70% (RBC prime) | 2.20 percentage points |
Each bank publishes its own prime, so check your own bank’s website. RBC notes that its rates “are subject to change without notice at any time.”
How is it linked to the policy rate?
The Bank of Canada announces its policy rate (the target for the overnight rate) eight times a year. The Bank says this rate affects “the prime rate of commercial banks (used for loans such as mortgages and lines of credit)”.
In practice, the big banks usually change prime by the same amount about a day after a policy rate change. In October 2026, the policy rate rose 0.25 percentage points and RBC’s prime rose 0.25 percentage points the next day.
As the table shows, prime is now 2.20 percentage points above the policy rate. Banks set that gap, so there is no guarantee it stays the same. After each announcement, check how much your own bank actually changed prime and from what date.
What do “prime minus” and “prime plus” mean?
A variable-rate product is priced as prime plus or minus a number. That number (the discount or premium) is fixed for the term; only prime moves.
| Product (example) | Rate in the contract | When prime is 4.70% | If prime falls to 4.45% |
|---|---|---|---|
| Variable-rate mortgage | Prime − 0.80% | 3.90% | 3.65% |
| HELOC | Prime + 0.50% | 5.20% | 4.95% |
| Variable-rate mortgage (no discount) | Prime | 4.70% | 4.45% |
Examples for reference only. The discount (such as −0.80%) depends on the bank, the time and your credit, and it can be negotiated. Check the real numbers in your commitment letter.
What happens to my payment when prime changes?
- Variable rate with adjustable payments: your monthly payment goes up or down starting with the next payment after prime changes.
- Variable rate with fixed payments (the rate changes but the monthly payment stays the same): the payment does not change, but the split between interest and principal does. If prime rises a lot you can hit the trigger rate, where the whole payment is interest. See “Fixed vs variable rate”.
- HELOC: you usually pay interest only each month, so the next month’s interest changes right away.
- Fixed-rate mortgage: prime does not matter until the term ends.
Fixed rates do not follow prime
A fixed mortgage rate is based mostly on the bank’s funding cost (what it pays to raise the money), not on prime. That cost moves with the interest rates paid to depositors and investors in Canada and other countries. The Bank of Canada itself says it “doesn’t set mortgage rates”: a policy change leads to similar changes in short-term rates like prime, and affects long-term rates mainly when people expect the change to last.
That is why fixed rates often rise or fall while the policy rate and prime stay the same. When you choose between fixed and variable, remember that the two rates move for different reasons.
Example calculation
Suppose you owe $500,000 on a variable-rate mortgage at “prime − 0.80%”, and prime rises 0.25 percentage points from 4.45% to 4.70%.
| Item | Amount |
|---|---|
| Your rate | 3.65% to 3.90% |
| Extra interest per year (roughly) | $500,000 × 0.25% = about $1,250 |
| Per month | About $104 |
An estimate for reference only; the real figure changes a little as the balance falls. The stress test uses the higher of your contract rate plus 2% and 5.25%, so before you choose a variable rate, check that you could carry that payment.
What to watch out for
- Check which prime your contract names. For example, TD prices its variable mortgages from a separate “TD Mortgage Prime Rate”, not its regular prime. The name in your contract is what counts.
- The discount is negotiable. The same “prime − 0.8%” offer differs between banks and over time, so compare two or three lenders, or ask a mortgage broker.
- Prime changes without notice. Knowing the eight Bank of Canada announcement dates helps you see variable-rate changes coming.
- Choose a variable rate only if you could still pay with prime 1 to 2 percentage points higher. This page is not a rate forecast.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
By encouraging financial institutions to borrow and lend among themselves at close to the policy rate, the Bank affects interest rates on all kinds of other borrowing in the economy, including: … the prime rate of commercial banks (used for loans such as mortgages and lines of credit)In plain wordsThe Bank of Canada’s policy rate influences the prime rate banks use for mortgages and lines of credit; it does not set it directly.
Source: bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/understanding-policy-interest-rate/ · checked Oct 30, 2026
Changes in the policy interest rate lead to similar changes in short-term interest rates. These include the prime rate, which is used by the banks as a basis for pricing variable-rate mortgages.In plain wordsWhen the policy rate changes, short-term rates such as prime change by a similar amount, and banks price variable-rate mortgages from prime.
Source: bankofcanada.ca/2020/05/whats-behind-your-mortgage-rate/ · checked Oct 30, 2026
The Bank of Canada today increased its target for the overnight rate by 25 basis points to 2.5%, with the Bank Rate at 2.75% and the deposit rate at 2.45%.In plain wordsOn October 28, 2026 the policy rate rose 0.25 percentage points to 2.50%, and bank prime rates rose 0.25 percentage points the next day.
Source: bankofcanada.ca/2026/10/fad-press-release-2026-10-28/ · checked Oct 30, 2026
Interest rates are subject to change without notice at any time.In plain wordsA bank can change prime at any time without warning. Signing a variable-rate contract means accepting that.
Source: rbcroyalbank.com/rates/prime.html · checked Oct 30, 2026
A TD variable interest rate mortgage means the rate of interest is based on the TD Mortgage Prime Rate, which can go up and down over the term of a mortgage loan.In plain wordsTD’s variable mortgages follow a separate “TD Mortgage Prime Rate”, not its regular prime. Check which prime your contract names.
Source: td.com/ca/en/personal-banking/products/mortgages/mortgage-rates · checked Oct 30, 2026
Today, the Office of the Superintendent of Financial Institutions (OSFI) announced that the minimum qualifying rate for uninsured residential mortgages (MQR) will remain the greater of 5.25 per cent or the mortgage contract rate plus 2 per cent.In plain wordsBanks test whether you could pay at the higher of your contract rate (for example prime − 0.80%) plus 2% or 5.25%, not at the contract rate itself. It is a cushion for rising prime.
Source: osfi-bsif.gc.ca/en/news/osfi-maintains-minimum-qualifying-rate-uninsured-mortgages · checked Oct 30, 2026
Common questions
Who sets the prime rate?
Each bank does. The Bank of Canada sets the policy rate, and banks usually follow its moves when they change prime, but no law ties the two together. The big banks’ primes are usually the same but do not have to be, so check your own bank’s number.
When does prime fall after a policy rate cut?
Banks usually announce a prime change around the day after the Bank of Canada decision. After the October 28, 2026 increase, RBC applied its new prime from October 29. The date it reaches your mortgage depends on your bank and contract, so check your commitment letter or your bank’s notice.
I was offered “prime − 1%”. How do I work out my rate?
Subtract 1 percentage point from prime at that moment. If prime is 4.70%, your rate is 3.70%. The 1% discount stays the same for the whole term, and your rate moves whenever prime moves.
Does a HELOC rate follow prime too?
Yes. A HELOC is usually priced as prime plus a number, and when prime changes the next month’s interest changes right away. The premium differs by bank, so check your terms.
If prime rises, is my fixed-rate mortgage safe?
A fixed-rate mortgage you already have keeps its rate until the term ends. At renewal you get the fixed rate of that day, and fixed rates depend mostly on the bank’s funding cost rather than on prime.
Is prime the same as a “preferred rate”?
Korean sometimes translates prime rate as a preferred rate. But a Canadian bank’s prime is not a special discount; it is the base number that variable-rate products are calculated from. On this site we call it the prime rate.
Guides that use this term
Sources checked
- Bank of Canada, Daily Digest (prime 4.45% and policy rate 2.25% on 2026-10-28) · checked Oct 30, 2026
- RBC, Prime and Other Rates (prime 4.70%, changed 2026-10-29) · checked Oct 30, 2026
- Bank of Canada, press release of October 28, 2026 (policy rate raised to 2.50%) · checked Oct 30, 2026
- Bank of Canada, Understanding our policy interest rate · checked Oct 30, 2026
- Bank of Canada, What’s behind your mortgage rate (May 27, 2020) · checked Oct 30, 2026
- TD, Mortgage rates page (TD Mortgage Prime Rate) · checked Oct 30, 2026
- OSFI, news release of December 12, 2023 (minimum qualifying rate) · checked Oct 30, 2026