Canada's prime rate is currently 6.95% as of early 2025, following a series of Bank of Canada rate cuts that began in June 2024. The prime rate fell from a peak of 7.20% (when the BoC policy rate was 5.0%) through several 25-basis-point and 50-basis-point reductions. The prime rate directly determines the cost of variable-rate mortgages, HELOCs, personal lines of credit, and student lines of credit.
What Is the Prime Rate?
Canada's prime rate (formally the "prime lending rate") is the benchmark interest rate used by the major chartered banks for pricing variable-rate loans and lines of credit. It's set by each bank independently, but in practice all major banks maintain the same prime rate, typically 2.45–2.70% above the Bank of Canada's target for the overnight rate (the policy rate).
The formula: Prime Rate = BoC Policy Rate + 2.45% to 2.70%
When the Bank of Canada changes its policy rate, the chartered banks change prime rate within hours — virtually always by the same amount.
Prime Rate History Canada (2019–2025)
| Date | BoC Policy Rate | Prime Rate | Change |
|---|---|---|---|
| January 2020 | 1.75% | 3.95% | — |
| March 2020 (COVID) | 0.25% | 2.45% | -1.50% |
| March 2022 (first hike) | 0.50% | 2.70% | +0.25% |
| December 2022 | 4.25% | 6.45% | +3.75% cumulative |
| July 2023 (peak) | 5.00% | 7.20% | +0.25% |
| June 2024 (first cut) | 4.75% | 6.95% | -0.25% |
| July 2024 | 4.50% | 6.70% | -0.25% |
| September 2024 | 4.25% | 6.45% | -0.25% |
| October 2024 | 3.75% | 5.95% | -0.50% |
| December 2024 | 3.25% | 5.45% | -0.50% |
| January 2025 | 3.00% | 5.20% | -0.25% |
| March 2025 | 3.00% | ~6.95%* | — |
*Note: Exact figures should be verified with Bank of Canada and individual banks as rates change with each BoC announcement.
How Prime Rate Affects Your Loans
Variable Rate Mortgages
Variable rate mortgages are priced at prime minus a discount (e.g., prime – 0.90%, which at 6.95% prime = 6.05%). When the BoC cuts prime, your mortgage rate falls immediately. When the BoC hikes, it rises. Canadians who took variable rate mortgages in 2022 saw their rates nearly triple in 18 months — a painful real-world demonstration of variable rate risk. For a full comparison, see Fixed vs Variable Mortgage 2025.
HELOC
A HELOC is always variable, typically prime + 0.5% to prime + 1%. At prime = 6.95%, a HELOC at prime + 0.5% = 7.45%. Each 0.25% BoC rate change = a 0.25% change in your HELOC rate. On a $100,000 HELOC balance, a 0.25% rate change = $250/year in interest ($20.83/month).
Personal Line of Credit
Personal LOCs are typically prime + 3% to prime + 7%. At prime = 6.95%, a personal LOC at prime + 4% = 10.95%. Each BoC cut saves approximately $10–$35/month on a $25,000 balance depending on your specific rate.
Student Lines of Credit
Professional student LOCs (medicine, dentistry, law) are typically at exactly prime rate. Currently, that's approximately 6.95% — competitive compared to the 0% federal student loan rate but very low compared to private borrowing alternatives.
Why Does Canada Have a Different Prime Rate Than the US?
The United States has its own Federal Reserve Funds Rate, which influences the US prime rate (US prime = Fed Funds Rate + 3%). Canada and the US have different monetary policies based on their different economic conditions. In 2024–2025, Canada cut rates more aggressively than the US due to weaker Canadian economic growth and higher household debt levels. This divergence can create pressure on the Canadian dollar (CAD weakens vs USD when Canadian rates are lower).
The Spread Between Prime and Bank of Canada Rate
The chartered bank prime rate has maintained a spread of 2.45–2.70% above the BoC policy rate throughout modern Canadian banking history. This spread covers the banks' cost of funds, risk premium, and profit margin on variable lending. The spread has been remarkably stable even through dramatic rate cycles, demonstrating how the major banks act as a cartel (legally, as oligopolists) on prime rate pricing.
When Will Prime Rate Change Next?
The Bank of Canada announces rate decisions 8 times per year. See our Bank of Canada Rate Decision schedule for the upcoming announcement dates and market expectations. As of early 2025, the BoC has signaled a data-dependent approach after cutting rates significantly — further cuts or a pause depend on inflation (see Canada inflation rate) and economic growth data.
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How is the prime rate announced?
The Bank of Canada announces its policy rate decision on scheduled dates (8 per year). Within hours, Canada's major banks announce their new prime rates through press releases and update their websites. The prime rate takes effect the day of or the next business day after the BoC announcement.
Is there a different prime rate for each bank?
In theory, each bank sets its own prime rate. In practice, all Big 5 banks (RBC, TD, BMO, Scotiabank, CIBC) maintain identical prime rates, usually matching each other within hours of a BoC announcement. Some smaller banks and credit unions may have slightly different prime rates, though this is rare.
How does prime rate affect my variable mortgage payment?
If you have a variable rate mortgage, your interest rate changes immediately when prime rate changes. With a fixed-payment variable mortgage, the split between interest and principal changes — a rate cut means more of your payment goes to principal. With an adjustable-rate mortgage (ARM), your actual payment amount changes. Check your mortgage agreement for specifics.
Related: Bank of Canada Rate Decision Schedule | All Loan Rates | Mortgage Rate Forecast 2025