The prime rate is the lending rate Canada’s banks and financial institutions use to set interest rates for variable loans and lines of credit, including mortgages. RBC Royal Bank’s prime rate today, September 25, 2023, is currently 7.2%.
About RBC Royal Bank’s prime rate
The current RBC Royal Bank prime rate is 7.2%. This is the same prime rate that you will find posted by most major financial institutions in Canada.
As with other banks, RBC Royal Bank usually only changes its prime rate in response to the Bank of Canada's (BoC) interest rate policy. When the BoC raises or lowers the key rate (known as the target for the overnight rate), RBC Royal Bank will usually adjust its prime rate by the same amount. For example, if the BoC were to raise the overnight rate by 25 basis points (bps), RBC Royal Bank would usually raise its prime rate by 25 basis points as well.
There have been some exceptions to this rule, where RBC Royal Bank hasn't fully passed on BoC rate cuts. For example, there have been times where the BoC has cut interest rates by 25 basis points, but RBC Royal Bank only lowered its prime rate by 15 basis points. At times like these, most of the major banks tend to make the same call. While it’s unusual for any bank to change its prime rate independent of BoC interest rate announcements, changes to the prime rate can happen at any time.
How the RBC Royal Bank prime rate affects variable mortgage rates
When you get a variable-rate mortgage from RBC Royal Bank, the interest rate will be expressed as the RBC Royal Bank prime rate, plus or minus a certain percentage point. For example, if the RBC Royal Bank prime rate is 3.00%, and your mortgage rate is prime minus 0.50%, your mortgage rate would be 2.50%.
- 3.00% (prime rate) - 0.50% (discount to prime rate) = 2.50% (mortgage rate).
If RBC Royal Bank were to change its prime rate, your mortgage rate would change by the same amount. For example, if the RBC Royal Bank prime rate were raised to 3.25%, your mortgage rate would rise with it to 2.75%.
- 3.25% (new prime rate) - 0.50% (discount to prime rate) = 2.75% (new mortgage rate).
How the RBC Royal Bank prime rate affects fixed mortgage rates
Unlike variable-rate mortgages, fixed-rate mortgages are not immediately affected by changes in the RBC Royal Bank prime rate. When you get a fixed-rate mortgage, your mortgage rate is guaranteed not to change for the entire term. This mitigates your risk in the event rates go up, because your rate won’t change. However, in the event that rates go down, you won’t enjoy the added benefit. Fixed rates are best if you think mortgage rates will go up, or if you want the stability of knowing exactly what rate you’ll be paying regardless of what happens in the market.
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