Prime rate in Canada
Key Takeaways
1. Canada's prime rate as of today is currently at 5.20%, influenced by the Bank of Canada's policy interest rate, also known as the target for the overnight rate.
2. The prime rate impacts variable loans and lines of credit, including variable-rate mortgages. When the Bank of Canada changes its overnight rate, lenders typically adjust their prime rates accordingly.
3. The housing market saw a dip in activity in December, with home sales decreasing by 5.8% from November. The latest rate cut announced in January 2025 and further cuts expected in the year are likely to increase buyer demand in the coming months.
The prime rate in Canada today, January 30, 2025, is currently 5.2%. The prime rate, also known as the prime lending rate, is the annual interest rate Canada’s major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages.
Prime rate vs. Bank of Canada target for the overnight rate
Canada Prime Rate Changes: 2010 - 2024
Effective Date | Prime Rate | Change |
January 29, 2025 | 5.20% | -0.25% |
December 11, 2024 | 5.45% | -0.50% |
October 23, 2024 | 5.95% | -0.50% |
September 4, 2024 | 6.45% | -0.25% |
July 24, 2024 | 6.70% | -0.25% |
June 5, 2024 | 6.95% | -0.25% |
July 12, 2023 | 7.20% | 0.25% |
June 8, 2023 | 6.95% | 0.25% |
January 25, 2023 | 6.70% | 0.25% |
December 8, 2022 | 6.45% | 0.50% |
October 27, 2022 | 5.95% | 0.50% |
Show more
September 8, 2022 | 5.45% | 0.75% |
July 14, 2022 | 4.70% | 1.00% |
June 2, 2022 | 3.70% | 0.50% |
April 14, 2022 | 3.20% | 0.50% |
March 3, 2022 | 2.70% | 0.50% |
March 30, 2020 | 2.45% | -0.50% |
March 17, 2020 | 2.95% | -0.50% |
March 5, 2020 | 3.45% | -0.50% |
October 25, 2018 | 3.95% | 0.25% |
July 12, 2018 | 3.70% | 0.25% |
January 18, 2018 | 3.45% | 0.25% |
September 7, 2017 | 3.20% | 0.25% |
July 13, 2017 | 2.95% | 0.25% |
July 16, 2015 | 2.70% | -0.15% |
January 28, 2015 | 2.85% | -0.15% |
September 9, 2010 | 2.75% | 0.25% |
July 21, 2010 | 2.75% | 0.25% |
June 2, 2010 | 2.50% | 0.25% |
The prime rate is primarily influenced by the policy interest rate set by the Bank of Canada (BoC), also known as the BoC's target for the overnight rate. While these rates are not the same, they are closely related. When the Bank of Canada changes the target for the overnight rate, lenders will generally adjust their prime rates within a few days.
→ Jump to Prime Rate FAQ section
→ Jump to Mortgage Minute video
What is the prime rate?
When you apply for a loan with a variable interest rate, your lender will give you an annual interest rate that’s tied to the bank’s prime rate. All kinds of loans are based on this rate, including certain mortgages, car loans, personal lines of credit, and even some credit cards. Think of the prime rate as the anchor these other interest rates are based on. As the prime rate in Canada moves up or down, so too does the rate of interest you pay on your loan.
WATCH: January 29, 2025 Bank of Canada announcement
January 2025: Mortgage market update
It is widely expected that Canada's prime rate will continue to lower in 2025, in tandem with anticipated rate cuts to the Bank of Canada's (BoC) Overnight Lending Rate.
The central bank has already enacted six rate cuts from June 2024 to January 2025, bringing its trend-setting benchmark rate down by a cumulative 200 basis points, currently at 3.00%. With inflation easing to 1.8% in December — near the BoC’s 2% target — markets anticipate at least two more quarter-point cuts in 2025. If additional cuts occur as expected, Canada’s prime rate could dip below 5% later this year. However, potential U.S. import tariffs remain a key risk that could alter the central bank’s course.
- Real estate update: On January 15, 2025, the Canadian Real Estate Association (CREA) reported a slowdown in Canada’s housing market for December 2024, following a strong autumn rebound. National home sales totalled 27,643 units, a 5.8% drop from November but a 19.2% year-over-year increase. While the holiday season and limited supply slowed activity, quarterly sales from October to December rose 10%, marking one of the strongest periods in two decades (excluding the pandemic). The national average home price increased 2.5% year-over-year to $676,640 but softened by 2.2% compared to November. The MLS Home Price Index (HPI), a stable pricing measure that filters out extreme values, recorded a small 0.2% annual decline, its smallest dip since April 2024, signalling stabilizing prices. Inventory levels remain constrained, with 128,000 properties available by year-end, a 7.8% year-over-year increase but still below the long-term average of 150,000. New listings fell 1.7% from November to 29,128, and months of inventory ticked up to 3.9, maintaining tight market conditions near seller’s market territory. The sales-to-new-listings ratio (SNLR) stood at 56.9%, well within CREA’s definition of a balanced market (45%-65%). Looking ahead, CREA expects a surge in activity in spring 2025 as lower interest rates and increased listings attract more buyers.
Read more: Canadian real estate ends 2024 with chilly sales -
CPI update: Statistics Canada’s latest Consumer Price Index (CPI) report, released on January 21, 2025, shows that Canada’s inflation rate ticked down to 1.8% year-over-year, marking a slight decrease from 1.9% in November 2024. This decline was attributed primarily to a temporary GST/HST tax break introduced in mid-December. The tax holiday impacted about 10% of the CPI basket, including food, alcohol, recreational cannabis, clothing, and education. Notably, food purchased from restaurants saw a 1.6% price reduction, alcoholic beverages dropped by 1.3%, and toys and games fell by 7.2%. However, gas prices went up by 3.5% year-over-year, partially offsetting these declines. Mortgage interest costs, a major contributor to inflation, dropped to 11.7% year-over-year, marking the 16th consecutive month of decline as the Bank of Canada’s five interest rate cuts continue to take effect. Shelter costs also grew slowly at 4.5%, down from 4.6% in November. Key measures tracked by the BoC, such as the CPI trim and median softened in December, reinforcing the case for a 25-basis-point rate cut in the BoC’s January 29 announcement. However, uncertainties regarding potential U.S. tariffs on Canadian exports could counteract progress toward the BoC’s 2% inflation target.
Canada housing market forecast for 2025
The Canadian Real Estate Association (CREA) recently shared its 2025 housing market forecast, highlighting a rebound in activity fueled by pent-up demand, lower borrowing costs, and a seasonal surge in listings. CREA forecasts 532,704 residential property transactions in 2025, reflecting an 8.6% increase from 2024 and an upward revision from the previous estimate of 6.6%. By 2026, sales are expected to rise another 4.5% to 556,662. The national average home price is projected to grow 4.7% year-over-year to $722,221 in 2025 and by another 3.3% to $746,379 in 2026. Regional differences will also remain significant. British Columbia and Ontario are expected to see strong sales growth due to lower current sales volumes and higher supply, while Alberta and Saskatchewan will likely experience price-driven demand, fueled by low inventory and affordable housing.
November 2024 Fed rate cut announcement: Key insights
On November 7, 2024, the US Federal Reserve announced a quarter-point reduction in its benchmark interest rate, marking its second consecutive cut since September. This latest decision is part of the Fed's ongoing efforts to manage inflation, which has fallen from a peak of 9.1% in June 2022 to 2.4% as of September 2024.
Looking ahead, the Fed's rate-cutting strategy faces uncertainty, particularly with the recent US Federal Election. President Elect Donald Trump's proposed economic policies may reignite inflation. Fed Chair Jerome Powell emphasized that decisions will be made on a meeting-by-meeting basis, with a focus on maintaining employment and price stability.
The impact of the Fed's rate cut extends beyond US borders, significantly influencing Canadian markets. Following the announcement, US bond yields — particularly the 10-year Treasury note — rose sharply, indicating higher borrowing costs ahead. Consequently, the government of Canada’s five-year bond yield also climbed above 3%, suggesting that fixed mortgage rates in Canada are likely to increase. This trend could result in higher costs for homeowners and potential buyers, affecting their borrowing decisions.
As both the Canadian and US economies navigate this period of volatility, borrowers are advised to stay prepared for fluctuating interest rates in the coming months.
Also read: US Federal Reserve cuts rate by 0.25% in November announcement
Canadian mortgage reform update
On September 16, 2024, the federal government announced sweeping changes to mortgage qualification rules for first-time home buyers, as well as those purchasing newly-constructed homes.
As of December 15, 2024:
- 30-year amortizations will be available for all first-time home buyers, regardless of whether they have an insured mortgage. These extended amortizations are also available for any purchase of new construction.
- The maximum purchase price for an insured mortgage (where less than 20% down is paid) will be increased to $1.5 million, from the current $1 million.
These are some of the most impactful mortgage reforms announced since 2012, and are anticipated to increase first-time home buyers’ affordability and access to the housing market.
Learn more about these new mortgage rule changes on the Ratehub.ca blog
How is the prime rate set in Canada?
Each bank sets its own prime rate, but the Big Five Banks usually all have the same prime rate. The prime rate is primarily influenced by the policy interest rate set by the Bank of Canada (BoC), also known as the BoC's target for the overnight rate. When the BoC raises the overnight rate, it becomes more expensive for banks to borrow money, and they raise their respective prime rates to cover the added costs. Conversely when the BoC lowers the overnight rate, banks usually lower their prime rates by the same amount.
Is the prime rate going up in Canada?
From early 2022 to the first half of 2023, the prime rate steadily increased in response to the Bank of Canada’s efforts to control high inflation. During this period, the Bank of Canada implemented a series of 10 rate hikes, pushing its Overnight Lending Rate to 5% by mid-2023. This resulted in the prime rate rising to 7.2%.
However, the trend started reversing in June 2024. By January 29, 2025, the Bank had implemented six consecutive rate cuts, reducing the benchmark rate from 5% to 3.00% — a total reduction of 200 basis points. As a result of these cuts, the prime rate will fall to 5.20%, providing much-needed relief to borrowers.
As a result of these cuts, the prime rate will fall to 5.45%, providing much-needed relief to borrowers.
How does the prime rate affect mortgage rates in Canada?
There are two main types of mortgage rates in Canada – fixed and variable. When you get a fixed mortgage rate, you agree to pay the same rate over the entire course of your mortgage term regardless of what happens in the outside market. Fixed mortgages are a good option if you’re worried mortgage rates will go up, or if you want to enjoy the stability of paying the same mortgage rate until it’s time to renew.
When you get a variable mortgage rate, the rate will be expressed as the prime rate plus or minus a certain percentage. When the prime rate in Canada goes up or down, your mortgage rate will go up or down by the same amount. Variable mortgages usually come with a lower rate vs. fixed-rate mortgages when you sign up, but there’s the risk that the rate could go up (or down) during your mortgage term. Many lenders will allow you to convert a variable-rate mortgage to a fixed-rate mortgage at any time, but you will have to pay the fixed rate as of the time you decide to switch.
Let’s look at an example. If the prime rate is 3.0%, and you get a variable-rate mortgage at prime minus 0.8%, your effective interest rate will be 2.2%.
Example 1: Your original mortgage rate
prime rate - discount to prime rate = your mortgage rate
3.00% - 0.80% = 2.20%
The prime rate can rise and fall over time, and variable-rate loans will rise and fall with it. To continue this example, if the prime rate were to increase by 0.25% to 3.25%, the interest rate on your mortgage would rise by the same amount, to 2.45%.
Example 2: Your new rate after prime rate increases during your mortgage term
new prime rate - discount to prime rate = your new mortgage rate
3.25% - 0.80% = 2.45% (new mortgage rate)
Check out your best current mortgage rates
Take 2 minutes to answer a few questions and discover the lowest rates available
Frequently asked questions
What is Canada's current prime rate?
The prime rate in Canada today, January 30, 2025, is currently 5.2%.*
* The prime rate in Canada shown above is automatically checked and updated on a daily basis for accuracy.
What is the prime rate vs. Bank of Canada rate?
The Bank of Canada’s rate, also referred to as the overnight rate, policy rate, or key interest rate, is the rate at which financial institutions borrow funds from one another (and sometimes from the Bank of Canada) for short-term needs. This rate is the Bank’s main tool for steering borrowing costs, influencing economic growth, and managing inflation.
The prime rate, on the other hand, is set independently by each financial institution. However, it closely follows the Bank of Canada’s key interest rate. When the Bank of Canada raises or lowers its rate, banks generally adjust their prime rates in the same direction. This directly impacts the interest costs for variable-rate products, such as variable-rate mortgages, home equity lines of credit, and some personal or business loans.
How is the prime rate related to the Bank of Canada’s key interest rate?
Banks and other lenders borrow money from various sources, including the Bank of Canada itself (through its lending facilities), and from one another in the overnight market. When the Bank of Canada raises the cost of borrowing in these markets by increasing its target for the overnight rate, it becomes more expensive for financial institutions to obtain the funds they lend out to consumers and businesses. They respond by raising their prime lending rates to cover the increased costs.
Conversely, when the Bank of Canada lowers its policy interest rate, borrowing becomes cheaper for banks and lenders, and they typically reduce their prime rates accordingly.
What will the prime rate in Canada be in 2025?
As of January 2025, the prime rate in Canada is 5.20%, following a series of rate cuts by the Bank of Canada (BoC) aimed at supporting economic growth while keeping inflation near its 2% target. While the exact trajectory of the prime rate remains uncertain, the BoC has indicated a more measured pace of cuts moving forward. If inflation remains controlled and no major economic disruptions occur, additional moderate reductions in the prime rate are possible, potentially bringing it below 5% later this year. However, the central bank’s decisions will depend on evolving economic conditions, including the potential impact of U.S. import tariffs and global trade developments.
Does the prime rate affect mortgage rates?
Yes, especially for variable-rate mortgages. Variable rates are usually set at prime plus or minus a certain percentage. When the prime rate goes up, so does the interest rate for a variable mortgage, and vice versa. Fixed mortgage rates, on the other hand, are more influenced by bond market movements rather than the prime rate.
Do all banks have the same prime rate?
Technically, each financial institution sets its own prime rate, and there’s no requirement for banks to have a uniform rate. However, in practice, the prime rates offered by Canada’s major banks are usually identical or very close. This happens because banks tend to follow the Bank of Canada’s changes to the overnight rate in tandem, and they also monitor each other to stay competitive.