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Prime rate in Canada

Key Takeaways

  1. Canada's prime rate as of today is currently at 4.95%, influenced by the Bank of Canada's policy interest rate, also known as the target for the overnight rate.
  2. The prime rate impacts variable loans and lines of credit, including variable-rate mortgages. When the Bank of Canada changes its overnight rate, lenders typically adjust their prime rates accordingly.
  3. The housing market saw an increase in activity in July, with home sales increasing by 6.6% from the same time last year. 

The prime rate in Canada today, August 29, 2025, is currently 4.95%. The prime rate, also known as the prime lending rate, is the annual interest rate Canada’s major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages.

Prime rate vs. Bank of Canada target for the overnight rate

Canada Prime Rate Changes: 2010 - 2025

Effective Date Prime Rate Change
July 30, 2025 4.95% 0.00%
June 4, 2025 4.95% 0.00%
April 16, 2025 4.95% 0.00%
March 12, 2025 4.95% -0.25%
January 29, 2025 5.20% -0.25%
December 11, 2024 5.45% -0.50%
October 23, 2024 5.95% -0.50%
September 4, 2024 6.45% -0.25%
July 24, 2024 6.70% -0.25%
June 5, 2024 6.95% -0.25%
July 12, 2023 7.20% 0.25%
June 8, 2023 6.95% 0.25%
January 25, 2023 6.70% 0.25%
December 8, 2022 6.45% 0.50%
October 27, 2022 5.95% 0.50%

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The prime rate is primarily influenced by the policy interest rate set by the Bank of Canada (BoC), also known as the BoC's target for the overnight rate. While these rates are not the same, they are closely related. When the Bank of Canada changes the target for the overnight rate, lenders will generally adjust their prime rates within a few days.

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What is the prime rate?

When you apply for a loan with a variable interest rate, your lender will give you an annual interest rate that’s tied to the bank’s prime rate. All kinds of loans are based on this rate, including certain mortgages, car loans, personal lines of credit, and even some credit cards. Think of the prime rate as the anchor these other interest rates are based on. As the prime rate in Canada moves up or down, so too does the rate of interest you pay on your loan.

August 2025: Mortgage market update

The Bank of Canada (BoC) has maintained its overnight lending rate at 2.75% as of July 2025. From June 2024 to March 2025, the BoC lowered its benchmark rate by a total of 225 basis points from a peak of 5%. Looking forward, ongoing global trade uncertainties, particularly related to tariffs, continue to impact economic forecasts and inflation, leaving the door open for potential future rate adjustments.

  • Real estate update: Canada’s housing market regained momentum in July 2025, according to the Canadian Real Estate Association (CREA). A total of 45,973 homes were sold during the month, marking a 6.6% increase from last year and a 3.8% rise from June. The uptick in sales reflects improving buyer confidence as the economy stabilizes after earlier tariff-related uncertainty. Despite the rise in sales, home prices have remained steady, keeping conditions relatively affordable. The national average price in July was $672,784, just 0.6% higher than a year ago and 1.3% above June. CREA’s MLS Home Price Index — a more stable measure of home values — was flat compared to June and still 3.4% lower year-over-year. Supply levels also remain supportive for buyers. New listings in July totalled 88,616, virtually unchanged from June. The national sales-to-new-listings ratio climbed up to 52%, from 50.1% in June and 47.7% in May. While still within balanced market conditions, this number marks a steady increase in buyer competition from earlier this year. Looking forward, CREA says the fall market could be pivotal. September usually brings a surge of new listings, and if that coincides with this renewed wave of buyer demand, competition could intensify quickly. 

Read more: Canadian home sales tick 6.6% higher in July

  • CPI update: Inflation in Canada eased to 1.7% in July, down from 1.9% in June, according to Statistics Canada. Much of the slowdown was due to falling energy prices, particularly at the gas pump. Gasoline prices declined 16.1% year over year, following a 13.4% drop in June, in addition to the removal of the federal consumer carbon tax in April. Without that policy change, overall CPI would have registered at 2.5%. Grocery prices, however, picked up again after moderating in June. Food purchased in stores rose 3.4% annually, coffee prices surged 28.6%, while confectionery was up 11.8%. Shelter costs added further pressure, with rents rising 5.1% year over year. This pushed the overall shelter index up by 3%, the first increase since February 2024. Homeowners continued to see some relief, as mortgage interest costs slowed to 4.8%, down from 5.6% in June and well below last year’s peak of 30.9%. Core inflation measures, meanwhile, showed little sign of easing. CPI-Trim and CPI-Median both remained elevated in the 3% range, suggesting underlying price growth remains sticky. While July’s headline decline raises the odds of a Bank of Canada rate cut at its September 17 meeting, the final decision will hinge on the August inflation report.

Read more: Canadian CPI falls to 1.7% in July

Canada housing market forecast for 2025

CREA has trimmed its housing forecast for 2025, as earlier hopes for a stronger rebound have been dampened by prolonged economic uncertainty. CREA now expects 469,503 homes to be sold across Canada this year, marking a 3% decline from 2024. The national average home price is projected to dip 1.7% to $677,368 in 2025, driven by a combination of lower sales volumes and price declines in the most expensive markets. CREA had previously expected prices to hold steady, but the slower start to the year has pushed national figures downward, despite estimated 4-8% price gains in many smaller markets. Looking ahead to 2026, home sales are projected to climb 6.3% to 499,081, putting the market back on the recovery path outlined in April. Even with this growth, it would mark the fourth consecutive year in which national sales remain below the 500,000 mark – an unusual trend in modern housing data. Average home prices are expected to rise 3% to $697,929, keeping price levels within the $700,000 range seen since 2021. While the path forward looks more stable, CREA cautions that forecasts still carry a high degree of uncertainty.

WATCH: July 30, 2025 Bank of Canada announcement

Canadian mortgage reform update

On September 16, 2024, the federal government announced sweeping changes to mortgage qualification rules for first-time home buyers, as well as those purchasing newly-constructed homes.

As of December 15, 2024:

  • 30-year amortizations will be available for all first-time home buyers, regardless of whether they have an insured mortgage. These extended amortizations are also available for any purchase of new construction.

  • The maximum purchase price for an insured mortgage (where less than 20% down is paid) will be increased to $1.5 million, from the current $1 million.

These are some of the most impactful mortgage reforms announced since 2012, and are anticipated to increase first-time home buyers’ affordability and access to the housing market. 

Learn more about these new mortgage rule changes on the Ratehub.ca blog

How is the prime rate set in Canada?

Each bank sets its own prime rate, but the Big Five Banks usually all have the same prime rate. The prime rate is primarily influenced by the policy interest rate set by the Bank of Canada (BoC), also known as the BoC's target for the overnight rate. When the BoC raises the overnight rate, it becomes more expensive for banks to borrow money, and they raise their respective prime rates to cover the added costs. Conversely when the BoC lowers the overnight rate, banks usually lower their prime rates by the same amount. 

Is the prime rate going up in Canada?

From early 2022 to the first half of 2023, the prime rate steadily increased in response to the Bank of Canada’s efforts to control high inflation. During this period, the Bank of Canada implemented a series of 10 rate hikes, pushing its Overnight Lending Rate to 5% by mid-2023. This resulted in the prime rate rising to 7.2%.

However, the trend reversed in June 2024. By March 12, 2025, the Bank had implemented seven consecutive rate cuts, reducing its benchmark rate from 5% to 2.75% — a total reduction of 225 basis points. In April, June, and July 2025, the BoC held its overnight rate steady at 2.75%. As a result of these recent holds, the prime rate has remained steady at 4.95%, offering much-needed relief to borrowers.

How does the prime rate affect mortgage rates in Canada?

There are two main types of mortgage rates in Canada – fixed and variable. When you get a fixed mortgage rate, you agree to pay the same rate over the entire course of your mortgage term regardless of what happens in the outside market. Fixed mortgages are a good option if you’re worried mortgage rates will go up, or if you want to enjoy the stability of paying the same mortgage rate until it’s time to renew.

When you get a variable mortgage rate, the rate will be expressed as the prime rate plus or minus a certain percentage. When the prime rate in Canada goes up or down, your mortgage rate will go up or down by the same amount. Variable mortgages usually come with a lower rate vs. fixed-rate mortgages when you sign up, but there’s the risk that the rate could go up (or down) during your mortgage term. Many lenders will allow you to convert a variable-rate mortgage to a fixed-rate mortgage at any time, but you will have to pay the fixed rate as of the time you decide to switch.

Let’s look at an example. If the prime rate is 3.0%, and you get a variable-rate mortgage at prime minus 0.8%, your effective interest rate will be 2.2%.

Example 1: Your original mortgage rate

prime rate - discount to prime rate = your mortgage rate

3.00% - 0.80% = 2.20% 

The prime rate can rise and fall over time, and variable-rate loans will rise and fall with it. To continue this example, if the prime rate were to increase by 0.25% to 3.25%, the interest rate on your mortgage would rise by the same amount, to 2.45%.

Example 2: Your new rate after prime rate increases during your mortgage term

new prime rate - discount to prime rate = your new mortgage rate

3.25%  - 0.80% = 2.45% (new mortgage rate)

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Frequently asked questions

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