Prime Rate

Prime rate is the foundation rate every Canadian variable-rate mortgage and home-equity line of credit references. Each lender sets its own prime, but they almost always move in lockstep — within a day or two of a Bank of Canada rate change. The historical relationship is approximately Bank of Canada overnight target plus 2.20%, though the exact spread varies by lender and over time. Variable-rate mortgages are typically priced as "prime minus X" (e.g. prime minus 0.50%) for the strongest borrowers, while HELOCs are priced as "prime plus Y" (e.g. prime plus 0.50%). When you see headlines about the Bank of Canada raising or lowering rates, that's the trigger that flows through to consumer prime rates within days, then to your variable mortgage payment if it's an adjustable-rate product. For fixed-rate mortgages, prime is irrelevant — those are priced from Government of Canada bond yields instead.