Last updated: March 2025 — Interest rates in Canada are linked to the Bank of Canada's policy rate, which directly determines the chartered bank prime rate. As of early 2025, the Bank of Canada's policy rate is approximately 3.0% and the chartered bank prime rate is approximately 6.95% (following a series of rate cuts from the 5.0% peak in 2024).
Current Interest Rates at a Glance (March 2025)
How Interest Rates Are Set in Canada
The Bank of Canada Policy Rate
The Bank of Canada (BoC) sets its overnight lending rate (the policy rate) 8 times per year. This rate directly influences all borrowing costs in Canada. When the BoC raises the policy rate, borrowing becomes more expensive across the board. When it cuts, rates fall. The BoC uses rate changes as a primary tool to manage inflation — raising rates to slow inflation, cutting rates to stimulate a slow economy.
The Prime Rate
Canada's prime rate is set by major chartered banks and is typically 2.45–2.70% above the Bank of Canada policy rate. When the BoC changes its policy rate, banks virtually always change prime rate by the same amount within 24 hours. Prime rate directly determines variable mortgage rates, HELOC rates, personal line of credit rates, and student line of credit rates. See our prime rate history page.
Fixed Mortgage Rates
Fixed mortgage rates are determined by bond markets — specifically the yield on Government of Canada 5-year bonds. When bond yields rise, fixed mortgage rates rise. When bond yields fall, fixed rates fall. Bond yields respond to inflation expectations, economic growth prospects, and global capital flows — not directly to BoC rate decisions (though there is correlation). This is why fixed and variable rates can sometimes diverge significantly.
Complete Rate Comparison Table — All Loan Types
| Product | Rate Range (APR) | Variable or Fixed | Credit Required |
|---|---|---|---|
| Insured 5-yr Fixed Mortgage | 4.69% – 5.19% | Fixed | Good (for insured) |
| Uninsured 5-yr Fixed Mortgage | 4.79% – 5.39% | Fixed | 720+ ideal |
| Variable Rate Mortgage | 4.95% – 5.55% | Variable (prime) | 680+ |
| HELOC | 7.20% – 7.70% | Variable (prime + 0.5%) | 680+, home equity |
| Bank Personal Loan (excellent credit) | 6.99% – 11.99% | Fixed | 720+ |
| Bank Personal Loan (good credit) | 9.99% – 14.99% | Fixed | 660–719 |
| Credit Union Personal Loan | 6.50% – 16.00% | Fixed or variable | 620+ |
| Personal LOC (good credit) | 9.95% – 12.95% | Variable (prime + 3–5%) | 680+ |
| New Car Loan (bank) | 5.49% – 9.99% | Fixed | 660+ |
| Used Car Loan (bank) | 7.49% – 12.99% | Fixed | 640+ |
| Alternative Lender (fair credit) | 14.99% – 29.99% | Fixed | 580+ |
| Alternative Lender (poor credit) | 29.99% – 46.96% | Fixed | 500+ |
| Low-rate credit card | 8.99% – 12.99% | Fixed | 680+ |
| Standard credit card | 19.99% – 22.99% | Fixed | 660+ |
| Store/retail credit card | 24.99% – 29.99% | Fixed | 620+ |
| Student LOC (professional) | 6.95% (prime) | Variable | In qualifying program |
Why Do Rates Vary So Much for the Same Loan Type?
Several factors cause rate variation within each category:
- Credit score: The single biggest factor. A 100-point difference can mean 3–5% rate difference
- Loan-to-value (LTV): For secured loans, more equity = lower rate
- Loan term: Longer terms sometimes carry higher rates due to increased uncertainty
- Loan amount: Larger loans sometimes get better rates (economies of scale for the lender)
- Employment type: Salaried employees typically get better rates than self-employed
- Lender competition: Online lenders and credit unions often beat bank rates to win business
Historical Rate Context
Understanding the current rate environment requires context. Canada's Bank of Canada policy rate peaked at 5.0% in July 2023 — the highest in 22 years — before declining through a series of cuts. As of early 2025, the rate has been cut to approximately 3.0%. This represents a significant reversal from the 2022–2024 tightening cycle, though rates remain well above the near-zero levels seen in 2020–2021.
The rate environment affects different borrowers differently: homeowners with variable rate mortgages have benefited from cuts; new buyers face higher fixed rates than the pandemic lows; savers now earn meaningful interest on GICs and HISAs after years of near-zero returns.
Rate Shopping Tips
- For mortgages: use a broker to access 30+ lenders with one application
- For personal loans: use a marketplace (Loans Canada, LoanConnect) for multiple offers with one soft inquiry
- For car loans: get bank pre-approval first, then let dealers try to beat it
- For HELOCs: compare your bank vs credit unions — credit unions often offer better rates
- For credit cards: a low-rate card (9.99% at some credit unions) is dramatically better than 19.99% if you carry a balance
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Open KOHO — Use Code 45ET55JSYAFor more depth: Prime Rate Canada History | Bank of Canada Rate Decisions | Fixed vs Variable Mortgage | Mortgage Rate Forecast 2025