Track the most important benchmark rate for variable-rate borrowing in Canada and see how it’s shaping your mortgage costs, lines of credit, and financial planning in 2026.
What Is the Prime Rate?
The prime rate is the annual interest rate that Canada’s major banks use as a baseline for pricing variable-rate loans and lines of credit. It’s not set by the government or the Bank of Canada directly.
Instead, each financial institution sets its own prime rate, though the Big Five banks typically align within hours of a Bank of Canada policy announcement. The prime rate influences what you pay on variable mortgages, home equity lines of credit, personal lines of credit, and many business credit products.
When the prime rate rises, borrowing becomes more expensive. When it falls, your interest costs decrease—assuming you hold a variable-rate product tied to prime.
Current Prime Rate in Canada
As of March 28, 2026, Canada’s prime rate is 4.45%. This rate has remained unchanged since October 30, 2025, when the Bank of Canada delivered its last rate cut.
The Bank of Canada held its overnight rate at 2.25% in its March 2026 announcement, marking the third consecutive hold. This pause reflects a more uncertain economic outlook, with policymakers weighing moderating inflation against weaker labour market data and elevated global trade uncertainty.
How the Prime Rate Is Set
Canada’s prime rate is influenced almost entirely by the Bank of Canada’s policy interest rate, also known as the target for the overnight rate. This is the rate at which banks lend to each other on an overnight basis.
When the Bank of Canada raises the overnight rate, it becomes more expensive for banks to borrow money. Banks respond by raising their prime rates to cover the added costs. Conversely, when the Bank of Canada lowers the overnight rate, banks usually lower their prime rates by the same amount within a few business days.
- Bank of Canada announces rate decision: Typically eight times per year at scheduled announcement dates.
- Banks adjust their prime rates: Most major lenders update their prime rates within 24 to 48 hours of the announcement.
- Variable-rate products reprice automatically: Your mortgage rate, HELOC rate, or line of credit rate adjusts in line with the new prime rate.
Although each bank technically sets its own prime rate, competitive pressure keeps them aligned. As of March 2026, all Big Five banks—RBC, TD, Scotiabank, BMO, and CIBC—share the same prime rate of 4.45%.
Prime Rate History: 2020–2026
Canada’s prime rate has moved through a dramatic cycle over the past six years. It fell to pandemic lows in 2020, surged through a rapid tightening cycle in 2022 and 2023, and has since retreated as inflation moderated.
| Effective Date | Prime Rate | Change |
|---|---|---|
| October 30, 2025 | 4.45% | -0.25% |
| September 18, 2025 | 4.70% | -0.25% |
| March 13, 2025 | 4.95% | -0.25% |
| January 30, 2025 | 5.20% | -0.25% |
| December 12, 2024 | 5.45% | -0.50% |
| July 13, 2023 | 7.20% | +0.25% |
| March 30, 2020 | 2.45% | -0.50% |
The prime rate peaked at 7.20% in July 2023 after the Bank of Canada delivered 10 consecutive rate hikes to combat inflation that had reached 8.1% year-over-year in June 2022. Since June 2024, the Bank has cut rates nine times, lowering the overnight rate from 5.00% to 2.25%.
Rates and terms may vary by financial institution. Always confirm current rates directly with your lender before making borrowing decisions.
How the Prime Rate Affects Mortgages
The prime rate is the foundation for all variable-rate mortgages in Canada. If you hold a variable-rate mortgage or a home equity line of credit, your interest rate is typically expressed as prime plus or minus a percentage.
Variable-Rate Mortgages
A variable-rate mortgage might be advertised as “prime minus 0.60%.” If the prime rate is 4.45%, your effective mortgage rate would be 3.85%. When the prime rate changes, your mortgage rate changes by the same amount.
There are two types of variable-rate structures in Canada: variable-rate mortgages (VRMs) and adjustable-rate mortgages (ARMs). With a VRM, your payment stays the same when the prime rate changes, but the portion going toward interest versus principal shifts. With an ARM, your payment adjusts up or down automatically.
- Lower starting rates: Variable mortgages often start with lower rates than fixed mortgages, which could save you money if rates remain stable or fall.
- Flexibility to benefit from cuts: If the Bank of Canada continues to lower rates, your borrowing costs decrease automatically without needing to refinance.
- Conversion options: Many lenders allow you to lock into a fixed rate at any time during your term, though you’ll pay the current fixed rate at the time of conversion.
- Payment uncertainty: If you hold an ARM, rising rates can increase your monthly payment, which may strain your budget if you haven’t planned for it.
- Negative amortization risk: With a VRM, if rates rise significantly and your payment doesn’t adjust, you could end up paying less than the interest owed each month, extending your amortization.
Home Equity Lines of Credit
HELOCs are typically priced at prime plus 0.50% or higher, depending on your credit profile and the lender. With the prime rate at 4.45%, a typical HELOC might carry a rate of 4.95% to 5.45%.
Because HELOC rates adjust immediately when the prime rate changes, your interest costs can fluctuate month to month. If you’re carrying a large balance on a HELOC, even a 0.25% rate change can affect your monthly interest charge.
Prime Rate vs US Prime Rate
Canada’s prime rate and the US prime rate move independently, reflecting different monetary policy decisions by the Bank of Canada and the US Federal Reserve. As of March 2026, Canada’s prime rate is 4.45%, while the US prime rate sits at 6.75%.
| Country | Prime Rate | Policy Rate |
|---|---|---|
| Canada | 4.45% | 2.25% |
| United States | 6.75% | 4.50%–4.75% |
The gap between Canadian and US rates reflects different economic conditions. Canada’s inflation has cooled faster than in the US, allowing the Bank of Canada to cut rates more aggressively. The US Federal Reserve has held rates higher for longer due to persistent inflation and stronger labour market data.
If you’re comparing chequing accounts or savings accounts in both countries, these rate differences can influence where you allocate funds, especially if you hold dual-currency accounts.
Prime Rate Forecast: 2026–2027
The Bank of Canada has signalled that it views the current overnight rate of 2.25% as within the neutral range, meaning it neither stimulates nor restricts economic growth. Bond market pricing as of March 2026 suggests a low probability of further rate cuts in the near term.
Most economists expect the overnight rate—and by extension, the prime rate—to remain near current levels through the end of 2026, with gradual reductions possible in 2027 if inflation remains below the Bank’s 2% target and trade uncertainty subsides.
- If inflation resurges: The Bank of Canada could pause rate cuts or even raise rates again, which would push the prime rate higher.
- If the labour market weakens significantly: The Bank might resume rate cuts, lowering the prime rate further and reducing borrowing costs.
- If trade tensions escalate: Uncertainty could dampen economic growth, prompting a more accommodative policy stance and lower rates.
Bottom Line
Canada’s prime rate is the most important benchmark for variable-rate borrowing. At 4.45% as of March 2026, it reflects a significant decline from the 7.20% peak in mid-2023 and offers more favourable conditions for borrowers with variable mortgages, HELOCs, and lines of credit.
If you’re choosing between fixed and variable mortgage products, the current environment suggests a pause in rate cuts. Fixed rates have started rising as bond yields move higher, while variable rates remain stable. This could make variable products attractive if you expect rates to resume falling in 2027, though the trade-off is exposure to payment fluctuations if economic conditions shift.
Before committing to any mortgage or credit product, compare current offerings across lenders, understand how your payments would change if rates move, and consider your tolerance for payment uncertainty. Stay informed by subscribing to our newsletter for regular updates on prime rate changes, Bank of Canada policy shifts, and expert analysis of what they mean for your finances.
