Prime rate in Canada

The prime rate in Canada today, January 23, 2026, is currently 4.45%. 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.

January 2026: Mortgage market update

The Bank of Canada held its overnight lending rate at 2.25% in its final announcement of the year, keeping policy unchanged after two cuts earlier in the fall. As a result, Canada’s prime rate remains at 4.45%, where it has stayed since the Bank’s October rate cut. This continues to support stable borrowing costs for households with variable-rate mortgages, HELOCs, and other prime-linked credit products.

• Real estate update: Canada’s housing market finished 2025 with muted activity, as momentum faded heading into the final month of the year. According to the Canadian Real Estate Association (CREA), 26,077 homes were sold nationwide in December, down 2.7% from November and 4.5% compared to December 2024. This capped a year of relatively flat performance, with 470,314 properties sold in 2025, a 1.9% decline from the previous year, as persistent economic uncertainty continued to weigh on buyer sentiment despite easing borrowing costs and supportive housing policies. At the same time, market conditions remained broadly balanced. Active listings rose to 133,495 by year-end, up 7.4% year over year, while both sales and new listings slowed into the holiday period. The national sales-to-new-listings ratio (SNLR) edged down slightly to 52.3%, from 52.7% in November, staying well within CREA’s 45%–65% balanced-market range. With neither side holding a decisive advantage, price pressures remained subdued. The national average home price was $673,335 in December, down 0.1% annually, while the MLS® Home Price Index declined 0.3% month over month and 4.0% from a year earlier. CREA noted that some of the late-year price softness likely reflected seasonal seller adjustments rather than a fundamental weakening in demand.

• CPI update: Statistics Canada reported that the Consumer Price Index (CPI) increased 2.4% year over year in December, up from 2.2% in November. The higher reading was largely the result of last year’s GST/HST tax relief falling out of the annual comparison, which lifted prices for certain goods and services on a year-over-year basis. Some of that upward pressure was offset by lower energy costs. Gasoline prices fell 13.8% compared with December 2024, a larger decline than in November. Excluding gasoline, inflation rose to 3.0%, up from 2.6%, highlighting that price increases were more pronounced in categories affected by the removal of the tax exemption. Food-related costs continued to be a key area of pressure. Prices for food purchased from stores rose 5.0% year over year and restaurant prices increased 8.5% annually. Overall shelter prices increased just 0.1% on a monthly basis, suggesting slowing momentum. Mortgage interest costs rose 1.7% year over year, extending a prolonged deceleration as earlier Bank of Canada rate cuts and holds continue to pass through to household borrowing costs. Rent inflation remained firm at 4.7%, reflecting ongoing tightness in rental markets. Beneath the headline figure, core inflation continued to ease. The CPI Median fell to 2.5%, while the CPI Trim declined to 2.7%, indicating that underlying price pressures are continuing to cool. Overall, the December inflation report supports expectations that the Bank of Canada will maintain its current policy stance in the near term.

Canada housing market forecast for 2026

Canada’s housing market is expected to build on its late-2025 recovery and post stronger results in 2026, according to CREA. After sales rebounded by 12% by August last year, the association expects lower interest rates and growing pent-up demand to support further improvement. National home sales are projected to rise 5.1% in 2026 to approximately 494,500 transactions, with British Columbia and Ontario seeing the largest gains at around 8%, helped by increased housing supply. Provinces that experienced more consistent demand throughout 2025 are expected to see slower growth by comparison. Home prices are also forecast to increase modestly this year. CREA expects the national average price to climb 2.8% to $698,881, though price growth is likely to remain restrained in higher-priced markets such as Ontario and B.C., as well as in Alberta and Nova Scotia, where sales momentum has cooled. In contrast, Saskatchewan, Quebec, and Newfoundland and Labrador are expected to continue posting price increases, albeit at a slower pace than in 2025. Looking ahead, CREA forecasts additional gains in 2027, with national sales rising another 3.5% and the average home price increasing 2.3% to $714,991 — marking the seventh consecutive year that prices have hovered close to the $700,000 level.

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 June 2024 and March 2025, the Bank delivered seven rate cuts, followed by two additional reductions in the fall. These moves brought the overnight rate down from 5% to 2.25%, the lowest level since 2022. As a result, Canada’s prime rate now sits at 4.45%, where it remains following the Bank’s December 2025 rate hold. With stronger-than-expected economic data and inflation near target, the central bank has paused its easing cycle, meaning further reductions to the prime rate are unlikely in the near term.

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