Prime rate in Canada
Key Takeaways
- 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.
- 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.
- The housing market saw an increase in activity in June, with home sales increasing by 3.5% from the same time last year.Â
The prime rate in Canada today, July 18, 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 |
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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September 8, 2022 | 5.45% | 0.75% |
July 14, 2022 | 4.70% | 1.00% |
June 2, 2022 | 3.70% | 0.50% |
April 14, 2022 | 3.20% | 0.50% |
March 3, 2022 | 2.70% | 0.50% |
March 30, 2020 | 2.45% | -0.50% |
March 17, 2020 | 2.95% | -0.50% |
March 5, 2020 | 3.45% | -0.50% |
October 25, 2018 | 3.95% | 0.25% |
July 12, 2018 | 3.70% | 0.25% |
January 18, 2018 | 3.45% | 0.25% |
September 7, 2017 | 3.20% | 0.25% |
July 13, 2017 | 2.95% | 0.25% |
July 16, 2015 | 2.70% | -0.15% |
January 28, 2015 | 2.85% | -0.15% |
September 9, 2010 | 2.75% | 0.25% |
July 21, 2010 | 2.75% | 0.25% |
June 2, 2010 | 2.50% | 0.25% |
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.
July 2025: Mortgage market update
The Bank of Canada (BoC) has maintained its overnight lending rate at 2.75% as of June 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 continued its gradual recovery in June 2025, with national home sales rising 3.5% year over year to 47,871 units. The Canadian Real Estate Association (CREA) attributes the rebound to improving buyer confidence after a quiet spring. Monthly sales activity also increased 2.8%, with the Greater Toronto Area leading the charge – up 17.3% since April. While demand is returning, prices remain subdued for now. The national average home price dipped 1.3% from June 2024 to $691,643, even as it rose 1.5% monthly from May. The MLS Home Price Index, which smooths out price volatility, fell 3.7% year over year but showed signs of stabilization, with a marginal 0.2% monthly decline. New listings rose 8.2% year over year to 97,093 in June, but fell 2.9% from the previous month. With inventory slightly tightening and sales increasing, the national sales-to-new-listings ratio climbed to 50.1%, up from 47.3% in May. This suggests that buyer competition is intensifying slightly. Overall, CREA says the market appears to be shifting into recovery mode even though economic risks persist, particularly around U.S. tariffs.
Also read: National home sales continue to recover in June
- CPI update: Inflation in Canada accelerated slightly in June, with the Consumer Price Index (CPI) rising 1.9% year over year, up from 1.7% in May and April, according to Statistics Canada. The increase was largely attributed to surging vehicle prices, which have been impacted by a 25% U.S. import tariff. In contrast, several everyday costs continued to ease. Gasoline prices were down 13.4% compared to a year ago, though that’s a slightly smaller drop than the 15.5% decline reported in May. Grocery inflation slowed to 2.8% from 3.3%, driven by a 3.1% drop in fresh vegetable prices. Food purchased in restaurants also rose at a slower pace, up 3.2% year over year. Shelter costs continued to moderate, rising 2.9% in June compared to 3.0% in May and 3.4% in April. Mortgage interest costs fell for the 22nd month in a row, rising 5.6% annually, down from 6.2% in May. Rent prices, meanwhile, saw a slight increase to 4.6%. However, the Bank of Canada’s core inflation measures showed little improvement. CPI-Median edged up to 3.1%, while CPI-Trim remained flat at 3.0%. With underlying inflation still above the Bank’s 2% target, and recent job numbers remaining strong, the likelihood of another interest rate cut at the BoC’s July 30th meeting is fading.Â
Read more: Canadian CPI rises to 1.9% in June
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: June 4, 2025 Bank of Canada announcement
What the latest U.S. tariffs mean for Canadian borrowers
On April 2, 2025, after months of uncertainty, the U.S. clarified its stance on tariffs. While Canada was exempt from the 50% reciprocal tariffs that the U.S. imposed on countries with trade surpluses, it still faces a 25% tariff on non-CUSMA imports and tariffs on steel, aluminum, and foreign cars and parts.
These tariff announcements have led to a sharp drop in bond yields, including Canada’s 5-year government bond yield, which fell to 2.488% as of April 3, 20225 — its lowest level since 2022. For Canadian borrowers, this means lower borrowing costs, with fixed mortgage rates now available as low as 3.74% for insured mortgages and 3.99% for uninsured mortgages.
The Bank of Canada (BoC), initially expected to cut its key interest rate in response to economic challenges, may instead decide to hold rates steady in its upcoming rate announcement on April 16. The BoC has stated that it will continue to monitor the global economic situation closely and adjust its policy as needed, particularly in response to ongoing tariff impacts.
The broader economic instability caused by U.S. tariffs and the resulting market volatility is leading to a slowdown in the housing market. February 2025 data from the Canadian Real Estate Association (CREA) showed a 10.4% decrease in home sales year-over-year.
Also read: How could 25% US tariffs impact Canadian mortgage rates?
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 2025 and June 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
What is Canada's current prime rate?
The prime rate in Canada today, July 18, 2025, is currently 4.95%.*
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* The prime rate in Canada shown above is automatically checked and updated on a daily basis for accuracy.
What is the prime rate vs. Bank of Canada rate?
The Bank of Canada’s rate, also referred to as the overnight rate, policy rate, or key interest rate, is the rate at which financial institutions borrow funds from one another (and sometimes from the Bank of Canada) for short-term needs. This rate is the Bank’s main tool for steering borrowing costs, influencing economic growth, and managing inflation.
The prime rate, on the other hand, is set independently by each financial institution. However, it closely follows the Bank of Canada’s key interest rate. When the Bank of Canada raises or lowers its rate, banks generally adjust their prime rates in the same direction. This directly impacts the interest costs for variable-rate products, such as variable-rate mortgages, home equity lines of credit, and some personal or business loans.
How is the prime rate related to the Bank of Canada’s key interest rate?
Banks and other lenders borrow money from various sources, including the Bank of Canada itself (through its lending facilities), and from one another in the overnight market. When the Bank of Canada raises the cost of borrowing in these markets by increasing its target for the overnight rate, it becomes more expensive for financial institutions to obtain the funds they lend out to consumers and businesses. They respond by raising their prime lending rates to cover the increased costs.Â
Conversely, when the Bank of Canada lowers its policy interest rate, borrowing becomes cheaper for banks and lenders, and they typically reduce their prime rates accordingly.
What will the prime rate in Canada be in 2025?
As of June 2025, the prime rate in Canada remains at 4.95%, following the Bank of Canada’s decision to hold its overnight lending rate steady at 2.75% for a second consecutive announcement. This follows seven rate cuts between June 2024 and March 2025, totalling a 225-basis-point drop.
The Bank has adopted a more cautious stance in recent months due to ongoing inflationary pressures – headline inflation increased to 1.7% ( 2.3% with taxes excluded) and core inflation rose to 3% in April. While the future of the prime rate remains uncertain, the Bank has signalled that any further changes will depend on evolving data related to inflation, trade policy impacts, and the strength of the domestic economy.
Does the prime rate affect mortgage rates?
Yes, especially for variable-rate mortgages. Variable rates are usually set at prime plus or minus a certain percentage. When the prime rate goes up, so does the interest rate for a variable mortgage, and vice versa. Fixed mortgage rates, on the other hand, are more influenced by bond market movements rather than the prime rate.
Do all banks have the same prime rate?
Technically, each financial institution sets its own prime rate, and there’s no requirement for banks to have a uniform rate. However, in practice, the prime rates offered by Canada’s major banks are usually identical or very close. This happens because banks tend to follow the Bank of Canada’s changes to the overnight rate in tandem, and they also monitor each other to stay competitive.