As the name suggests, Canada's "prime rate" is the lowest available lending rate that all major financial institutions charge their most trusted customers for a variety of credit products, including mortgages, personal loans and lines of credit.
menWhat is the current prime rate in Canada?
From May 2023, the base rate is set at 6.70%; however, it is subject to change because it is closely tied to the country's "overnight rate"—a key rate set by the Bank of Canada so banks can lend to each other.
Learn more about prime rates and how they affect ordinary consumers and their loan applications in the sections below!
What does "prime rate" mean?
Basic is the primary rateminimum interest rateCanadian banks and other lenders give loans to the most loyal applicants, so it serves as a benchmark for determining the interest rates they charge on all loan products.
Prime rate increase due to rapidly rising inflation through 2021 and 2022 (as a result of pandemic and war)From 2.45% on March 2, 2022 to 6.70% on January 25, 2023.- As of May 2023, it remains stable.
How is the "prime rate" determined?
Although banks are free to set their own prime rates,Major Canadian banks have an informal agreement to use it, were set a day after the country's central bank - the Bank of Canada - changed its rate overnight.
Additionally, since 2015 the prime rate has fluctuated at the same pace as the Bank of Canada's key rate --Float 2.20% over it.Since the overnight rate remained at 4.50% from February 2023, the prime rate was 6.70%.
The reason for this close relationship between the two rates is that when the Bank of Canada raises the overnight rate, the fees banks have to pay go up. Indeed they areMake up for the increased costs by getting customers to pay more.
How does this affect the average Canadian?
Most Canadians are affected immediately and overnight by changes in prime interest rates as their variable interest rates rise or fall with them. After all, financial institutions adjust their internal structure of loans according to the prime rate. For example, variable rate loans are often presented in the following format:Prime Rate +/- 1, 2, 3 % etc.
The impact of higher and lower prime rates on everyday consumers includes:
|Raise the base rate||drop in the primary rate|
note:In times of economic turmoil, consumers should consider borrowing at a fixed rate because interest does not increase with the prime rate.
How does this affect different loan rates?
As mentioned above, changes in prime interest rates also affect loan rates for different loan products, which ultimately affects different types of borrowers in the country:
1. Mortgages with a variable interest rate
As a general rule, any lender that offers a variable rate mortgage product bases its mortgage rate on the current prime rate and adjusts its mortgage rate - when the prime rate rises or falls,Interest rates on mortgage loans can also rise or fall.
However, the actual interest rate paid will vary depending on factors such as lender policy and the applicant's circumstances: mortgage and property size.
Some lenders even offer slightly lower rates, especially if they expect the Bank of Canada to raise overnight rates soon.
In this case, however, borrowers still prefer to get an adjustable rate loan, especially if they expect to pay off the loan fairly quickly.
In any case, most consumers can switch from variable rate mortgages to fixed rate mortgages - a safe decision if prime rates rise.
2. Credit card
Because credit cards are not backed by valuable assets, they representUnsecured loans with higher interest ratesto compensate for the increased risk.
So when you're comparing different credit cards, you'll likely see them described as "Prime + 4.50% to 12.50%" or "Prime + 10% only."
Because their APR is variable, especially when the bank changes rather than the prime rate, credit cardholders need to be preparedUnstable fluctuations in interest payments, especially if the market is experiencing inflation or recovering from inflation.
3. Car loan
Compared to credit cards, auto financing is a mortgage with lower interest rates, but still lower than mortgage products.
Most of them are also based on the base price, so yoursPayments change when the Bank of Canada introduces a new overnight rate.On the other hand, if you're considering a fixed-rate car loan, apply as soon as you discover the lower rates, as those can change as well.
In order to stand out, some car dealers may even offer car loans at very low or even zero interest rates - deals you shouldn't miss out on.
4. Home Equity Line of Credit (HELOC)
Such productsalways use variable interest ratesPrime rates based on the country so you'll notice any changes in prime rates immediately.
However, the incremental HELOC is on the lower end. So you'll typically see HELOCs offered at "Prime + 0.50% to 1%."
However, be careful when applying for a line of credit secured by your home, because if you run into trouble, your assets are at risk of loss. So contact a financial professional to see if other loan options are available to you.
5. Personal loan
This general form of loan comes in different shapes and sizes. For example, you can get a loan in the amount of 100 to 50,000 DKK, use insurance for better loan conditions and choose a repayment term of 6 to 60 months.
Since this type of product is used for different purposes,The lender offers more flexibility than other loans.For example, in addition to the size of the loan, customers can choose whether they want a loan with a fixed interest rate or a loan with a variable interest rate.
The size of their payment will also depend on the period they choose, the size of the add-ons and whether they add additional services. Of course, those withVariable loans can end up paying different amountsoffline.
6. Business loan
Like personal loans, business financing in Canada has both fixed and variable interest rates. But if you are an entrepreneur who needs a loan, there are many loans available to youIndividual borrowers do not have access to various benefits.
For example, business loans have longer repayment periods, more capital and lower interest rates, so even if the prime rate changes,Owners are less affected than ordinary consumers.Interest is also tax deductible in most cases!
Trends in prime rates in Canada
Although the base rate changes over time, there are sometimes constant and unpredictable fluctuations due to external factors affecting the country's economy.
We live in a time caused by several factors, the most prominent of which are the Covid-19 pandemic and Russia's unjust invasion of Ukraine.
Let's take a look at the latest changesHistory of the Canadian prime rate:
|change the date||primary rate||change the amount|
|April 12, 2023||6,70||—|
|March 8, 2023||6,70||—|
|January 25, 2023||6,70||+0,25|
|December 7, 2022||6,45||+0,50|
|November 26, 2022||5,95||+0,50|
|September 7, 2022||5,45||+0,75|
|July 13, 2022||4,70||+1,00|
|June 1, 2022||3,70||+0,50|
|April 13, 2022||3,20||+0,50|
|March 2, 2022||2,70||+0,25|
|January 26, 2022||2,45||—|
|December 8, 2021||2,45||—|
As you can see, the base rate has been steadily increasing since March 2, 2022From 2.45% up to 6.70%- It reached a milestone on January 25, 2023.
In addition, the rate of 2.45%, which has been maintained for two consecutive years since March 2020, is the lowest benchmark rate since 2.25% in early 2010.
For the rest of 2023, the main rate (and overnight rate) isIt is expected to remain at 6.70%, a possible decrease of 0.25% in October 2023.
Is the main price the same across Canada?
Although each Canadian bank is responsible for setting its own prime rate, all major banks and other smaller lenders choose to use the same prime rate.
For example,major banksDomaće, od Royal Bank of Canada do Scotiabank, TD Bank, CIBC, BMO, HSBC i National Bank of Canada,Increase base rate from 6.45% to 6.7%January 25, 2023
The prime rate is the base rate that lenders use when setting rates on all their products so that only the most reliable customers have access to it. All others are usually quoted a few percentage points above the primary value.
After the country's central bank - the Bank of Canada - adjusts the overnight interest rate, banks change their prime rate, which is 2.2 percent below prime.
Ultimately, the prime interest rate is an indicator of the health of the economy and affects all credit products. Therefore, borrowers of variable rate loans must keep an eye on the base interest rate to adjust their financial situation as needed.
The Prime rate in Canada is currently 6.70%.What will the prime rate be in 2023 Canada? ›
Bank of Canada Rate Forecast for 2023: Stable at 4.5%What is the prime rate in Canada history? ›
|September 08, 2022||5.45%|
|July 14, 2022||4.70%|
|June 02, 2022||3.70%|
Enjoy this low introductory rate†, equal to CIBC Prime currently at 6.70%, until December 3, 2023.What will prime interest rate be in 2024 Canada? ›
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|Variable Rate Interest Forecast 2023 to 2028 (as of May 2023)|
Prime Rates in Canada
The Prime rate in Canada is currently 6.70%. The Prime rate is the interest rate that banks and lenders use to determine the interest rates for many types of loans and lines of credit.
The last 13 months saw the Bank of Canada rapidly increase its policy rate from 0.25% in March 2022 to the current level of 4.5%, bringing higher prime rates and higher variable and adjustable mortgage rates.What is the highest interest rate ever in Canada? ›
Deposit Interest Rate in Canada averaged 5.64 percent from 1975 until 2023, reaching an all time high of 22.06 percent in August of 1981 and a record low of -0.10 percent in October of 2020.What is HSBC prime rate? ›
About HSBC's prime rate
The current HSBC prime rate is 6.7%. This is the same prime rate that's posted by most major financial institutions in Canada. As with other banks, HSBC usually only changes its prime rate in response to Bank of Canada (BoC) interest rate policy.
The market consensus on the mortgage rate forecast in Canada (as of May 4, 2023) is for the Central Bank to hold its rate at 4.50%, and as long as inflation continues on its downward trend, for rate hikes to be finished.Will prime rate go down in Canada 2023? ›
If you're hoping interest rates will go down sooner rather than later this year, you might be disappointed. Several economic projections indicate that interest rates will only begin to go down sometime during the final quarter of 2023 or in the first quarters of 2024.How high will prime rate go in 2023? ›
Rates will keep rising in 2023
In December, the FOMC projected that the median Federal Funds Rate (FFR) in 2023 would be 4.6 percent. This projection was revised in March, with the FOMC projecting the FRR to hoover between 5.1 and 5.6 percent in 2021.
BENGALURU, April 6(Reuters) - The Bank of Canada will keep its key interest rate steady at 4.50% through 2023, according to most economists polled by Reuters, with an even smaller minority now expecting an interest rate cut by year-end than a poll taken a month ago.What will the prime rate be in 2026? ›
Mortgage Interest Rate Projected Forecast 2026. The 30 Year Mortgage Rate will continue to rise further in 2026. The 30 Year Mortgage Rate forecast at the end of the year is projected to be 17.81%.What will inflation be in Canada 2023 2024? ›
Monetary Policy Report – April 2023
Inflation in Canada remains high but should come down quickly to around 3% in the middle of this year because of lower energy prices, improved supply chains and restrictive monetary policy. The Bank projects that inflation will reach the 2% target by the end of 2024.
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US Bank Prime Loan Rate is at 8.25%, compared to 8.25% the previous market day and 4.00% last year.What is the US prime rate for Scotia? ›
About Scotiabank's Prime Rate
Today's Scotiabank Prime Rate is 6.7%, which is current as of May 11, 2023. Also known as the Scotiabank Prime Lending Rate, this rate is used for Scotiabank's loans and mortgages that have a variable rate.
7% interest isn't something banks offer in the US, but one credit union, Landmark CU, pays 7.50% interest, though there are major requirements and stipulations.
- Varo Savings Account.
- Western Alliance Bank Savings Account.
- Newtek Bank Personal High Yield Savings.
- UFB Premier Savings (previously known as UFB Preferred Savings)
- Laurel Road High Yield Savings®
- Panacea High-Yield Savings Account.
- Bask Interest Savings Account.
|Savings Account||Interest Rate||Monthly Fee|
|EQ Bank's Savings Plus Account**||2.50%||$0|
|FirstOntario Credit Union High Interest eSavings Account (Ontario only)||1.75% - 1.85%||$0|
|Home Trust High Interest Savings Account (HISA)||4.20%||TBD by issuer|
|Hubert Financial Happy High-Interest Savings Account**||3.30%||$0|
The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.What will the Federal Reserve prime rate be in 2023? ›