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. TD Bank’s prime rate today, December 4, 2023, is currently 6.95%.
About TD Bank’s prime rate
When the Bank of Canada (BoC) changed the target for the overnight rate in July 2015, TD was the first bank to change its prime rate, but it didn’t pass on the full change to its customers. At the time, the overnight rate was lowered by 25 basis points (bps) but TD only lowered its prime rate by 10 basis points. After the other big banks settled at a 15-bps drop, TD eventually lowered its prime rate to match.
TD Bank’s posted prime rate is 7.2%. TD Bank is also unique in that it posts a separate prime rate for mortgages. As of June 15th, 2023, the TD Bank mortgage prime rate is 7.10%.
How the TD Bank prime rate affects variable mortgage rates
When you get a variable-rate mortgage from TD Bank, the interest rate will be expressed as the TD Bank prime rate, plus or minus a certain percentage point. For example, if the TD 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 TD Bank were to change its prime rate, your mortgage rate would change by the same amount. For example, if the TD 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 TD Bank prime rate affects fixed mortgage rates
Unlike variable-rate mortgage, fixed-rate mortgages are not immediately affected by changes in the TD 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, if 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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