Prime rate in Canada

The prime rate in Canada today, September 17, 2025, is currently 4.7%. 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.

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.

September 2025: Mortgage market update

The Bank of Canada (BoC) cut its overnight lending rate to 2.50% on September 17, 2025. This marks a total decrease of 250 basis points since the Bank first started cutting rates in June 2024, bringing this benchmark rate down from a peak of 5%. Following the rate cut, Canada’s prime rate will decline to 4.70%, reducing borrowing costs for variable-rate mortgages, HELOCs, and other prime-linked products.

• Real estate update: Canada’s housing market kept its recovery going in August 2025, marking the fifth consecutive month of stronger sales. The Canadian Real Estate Association (CREA) reported 40,257 transactions during the month, up 1.9% from last year and 1.1% higher than July. Even as sales improved, prices remained steady rather than accelerating. The national average price in August was $664,078, a 1.8% increase from a year ago and virtually flat compared to July. CREA’s MLS Home Price Index, which better reflects typical transactions, was down 3.4% annually and held unchanged month-over-month. On the supply side, sellers became more active. New listings rose 6.1% year-over-year to 75,959, while total inventory reached 195,453 homes, up 8.8% annually and in line with long-term trends. The national sales-to-new-listings ratio edged down slightly to 51.2%, well within the balanced market range of 45–65%. Months of inventory also held at 4.4, its lowest since January, but still reflective of stable conditions. With fresh listings coming onto the market and pent-up demand from the spring, CREA expects the fall housing season could see stronger activity, especially if the Bank of Canada delivers a rate cut.

Read more: Canadian home sales hit highest August since 2021

• CPI update: Canada’s Consumer Price Index (CPI) rose back to 1.9% in August, reversing July’s brief slowdown when inflation eased to 1.7%. The increase was driven in part by gasoline, which fell by 12.7% compared to a larger 16.1% drop the previous month. Food inflation also picked up, with prices up 3.5% compared to 3.4% in July. Meat was the main driver, surging 7.2% after a 4.7% gain the month before. Dining out costs continued to climb, with restaurant food rising 3.3% year-over-year. Shelter costs, which have been a major source of inflation, showed further moderation by slowing down to 2.6% in August from 3% in July. Rent increases cooled to 4.5%, while mortgage interest costs rose 4.2%, marking a sharp decline from the 30.9% surge recorded in August 2023. The easing reflects the effect of falling mortgage rates, which have steadily lowered borrowing costs over the past year and a half. This CPI report helped support the 25-basis-point cut from the Bank of Canada on September 17, along with weaker employment numbers. Core inflation readings also suggest some easing, with CPI Trim dipping to 3% from 3.1%, while CPI Median held at 3.1%.

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.

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. Between then and March 2025, the Bank delivered seven consecutive cuts, bringing its benchmark rate down from 5% to 2.75%. After holding steady at that level through the spring and summer, the Bank cut again on September 17, 2025, lowering the overnight rate to 2.50%. As a result, Canada’s prime rate has now decreased to 4.70%, providing further relief for variable-rate 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)

Bank prime rates

• Tangerine Prime Rate 
• TD Bank Prime Rate 
• Scotiabank Prime Rate 
• HSBC Prime Rate 
• Bank of Montreal Prime Rate 
• CIBC Prime Rate 
• RBC Royal Bank Prime Rate