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What is the Prime Rate in Canada in 2023?

After a long pause in hikes, prime rates in Canada are on the move again. As of June 14, 2023, the prime rate is 6.95%, rising another 0.25% (25 basis points).

The prime rate was pegged at 2.45% for a while after the pandemic hit Canada in 2020.

As of then, the only other time in recent history that the prime rate has fallen below 2.50% was in April 2009 during the thick of the financial crisis.

What is the prime rate in Canada, and how does it impact your wallet? Read on to find out.

What is the Prime Rate?

The prime rate is the interest rate banks and other financial institutions use as a starting point for their variable interest rate products.

Examples of financial products that rely on the prime interest rate include:

How is the Prime Rate Determined?

Banks revise their prime rate based on the Bank of Canada’s policy interest rate, aka “target for the overnight rate” or “key interest rate.”

The overnight rate is what it costs banks to lend money to each other overnight. This rate is set by the Bank of Canada at a level that matches the prevailing monetary policy, level of inflation, and economic performance.

The current target for the overnight rate is 4.75%. Generally, when the overnight rate falls, banks lower their prime rate by the same amount and vice versa.

For example, when the overnight rate was 4.50%, the prime rate was 6.70%. When the overnight rate increased by 25 basis points (bps) to 4.75%, the prime rate also increased to 6.95% (+0.25%).

Analysts wait on the Bank of Canada’s announcements all through the year (eight fixed days) to learn about changes to the key interest rate.

For 2023, the interest rate announcements are set for January 25, March 8, April 12, June 7, July 12, September 6, October 25, and December 6.

Current Prime Rate for Canada’s Banks

The current prime rate for banks in Canada are:

BankPrime Rate
TD prime rate*6.95%
RBC prime rate6.95%
Scotiabank prime rate6.95%
CIBC prime rate6.95%
BMO prime rate6.95%
National Bank prime rate6.95%
HSBC prime rate6.95%
Tangerine prime rate6.95%
*TD’s mortgage prime rate is usually higher.

Attention is usually directed at how the Big 6 (RBC, BMO, Scotiabank, CIBC, TD, and National Bank) react to a change in the overnight rate and the impact on their published prime rate.

While the banks typically follow in lockstep to adjust their prime rates by an equal amount, this is not always the case.

Impacts of the Prime Rate on Your Finances

The prime rate affects variable rates and your cost of borrowing. Financial products that are immediately impacted include variable-risk mortgages, personal loans, lines of credit, HELOCs, and credit cards with variable APRs.

For example, your bank may advertise a 5-year variable mortgage loan (closed) as Prime – 0.40%. At the current prime rate level of 6.95%, this means your mortgage rate is 6.55% (i.e. 6.95% – 0.40%).

If the overnight rate rises by 50bps to 5.25% and the prime rate becomes 7.45%, your effective variable mortgage rate rises to 7.05% (i.e. 7.45% – 0.40%).

For comparison sake and the same mortgage length, the bank’s variable “open” mortgage rate may be listed as Prime + 1.00%, which is equivalent to an effective mortgage rate of 7.95%.

Compared to fixed interest rate products that stay the same throughout the term, variable rate loan products will rise and fall in tandem with the prime rate.

Banks may also vary the rates they pay on savings accounts when the overnight rate changes. During the recent emergency rate cuts, the savings accounts rates offered by many of the big banks effectively fell to 0%.

This is in line with the monetary policy objective of the Bank of Canada, in which a lower interest rate on loans, mortgages, savings, etc., directly and indirectly, stimulates economic activity when inflation rates fall below target.

Lastly, a change in the overnight rate can affect the exchange rate of the Canadian dollar.

Related: Best mortgage rates in Canada.

Prime Rate History in Canada

Below is a chart showing the history of prime rates in Canada over the last 10 years (hover or click to see rates).

If you are interested, I have also included a table showing how the prime lending rate for Canada’s chartered banks fared during the same time period.

DateBank Prime Lending Rate Canada
June 20236.95%
January 20236.70%
December 20226.45%
October 20225.95%
September 20225.45%
July 20224.70%
June 20223.70%
April 20223.20%
March 20222.70%
March 20202.45%
March 20202.95%
March 20203.45%
October 20183.95%
July 20183.70%
January 20183.45%
September 20173.20%
July 20172.95%
July 20152.70%
January 20152.85%
September 20103.00%
July 20102.75%
June 20102.50%

Related Posts:

Canada Prime Rate FAQs

What is Canada’s Prime Rate?

The current prime rate in Canada is 6.95%

Will mortgage rates rise in Canada in 2023?

Yes, chances are that mortgage rates will increase in 2023 as the Bank of Canada increases its policy interest rate. Variable-rate mortgages respond to changes in the prime rate. When the prime rate rises, variable mortgage rates increase, and they drop when the prime rate goes down.

What is the Bank of Canada’s Prime Rate?

The prime rate is set by banks/lenders and not the Bank of Canada (BOC). Financial institutions base their prime lending rate on the overnight rate set by the BOC. The BOC’s target for the overnight rate is currently set at 4.75%.

When will the Prime Rate change?

The Bank of Canada makes interest rate announcements eight times a year. They can change the overnight rate during these announcements, which impacts the prime rate. The dates for 2023 are January 25, March 8, April 12, June 7, July 12, September 6, October 25, and December 6.

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Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch is passionate about helping others win with their finances and has been writing about money matters for over a decade. He has been featured or quoted in Forbes, The Globe and Mail, Winnipeg Free Press, Wealthsimple, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

4 thoughts on “What is the Prime Rate in Canada in 2023?”

  1. Gravatar for cy

    What are ways to monitor changes to the prime rates when one has a variable mortgage? It seems like a starting point is to follow the BOC interest rate announcements (eight times a year), but are there any other reliable sources or apps to follow?

    • Gravatar for Enoch Omololu

      @Cy: I generally just follow the BOC’s announcement. A site like RateSpy may be worth following as well.

  2. Gravatar for Julie

    Will the prime rate increase or decrease in Sept. 7?

    • Gravatar for Enoch Omololu, MSc (Econ)

      @Julie: It is very likely to rise.

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