Prime Rate in Canada: What It Is, How It’s Set

The prime rate is a base rate set by financial institutions in Canada to determine the variable interest rates they can charge on lending products, such as mortgages and loans.

A bank’s prime rate is based on the Bank of Canada’s overnight rate, also referred to as the policy interest rate. The overnight policy changes impact the prime rate, further affecting the interest rates of financial products, regardless of the type of interest tied to them.

The prime rate in Canada, as of June 10, 2026, is 4.45%.

When you’re considering a new line of credit or a mortgage with a variable rate, you also will need to keep a close eye on the prime rate. This will ultimately determine how much interest you’ll pay over time, in addition to repaying the principal amount you borrowed.

The prime rate, also referred to as the prime lending rate, is an interest rate set by large Canadian financial institutions, such as the Big Six banks. While each bank sets its own prime rate, the posted prime rates for major banks are often the same.

Their prime rates depend on the Bank of Canada’s policy interest rate, which is the average interest rate for one-day loans between financial institutions. For instance, if the Bank of Canada’s benchmark overnight rate increases, it costs financial institutions more to borrow and lend funds to each other.

Policy interest rate vs. prime rate

How does prime rate work?

The prime rate serves as the basis for the interest rate that lenders will charge for certain loans, such as variable-rate mortgages and car loans, home equity lines of credit (HELOCs) and unsecured lines of credit.

In many cases, you won’t pay the actual prime rate on your loan. Financial institutions typically offer rates in terms of the prime rate plus or minus a certain percentage. And the rate you’re offered depends on conditions in the lending markets and on factors, like your credit, the amount you’re borrowing and whether the loan is secured.

The prime rate in Canada, as of June 10, 2026, is 4.45%.

This rate was adopted by most of Canada’s major banks, such as the Royal Bank of Canada and TD Bank, following the Bank of Canada’s last overnight rate cut to 2.25% on Oct. 29, 2025.

How often does the prime rate change in Canada?

The prime rate has the potential to change eight times a year, in line with the Bank of Canada’s eight fixed annual announcements to announce policy interest rate decisions.

In 2025, the prime rate changed four times after the Bank of Canada announcements.

Where to find the daily prime rate online

The Bank of Canada’s website provides a daily digest that includes the current overnight rate, as well as other financial information, such as Government of Canada bond yields and exchange rates. Each large financial institution posts its prime rates on its website, often on pages specific to relevant borrowing products.

Historically, Canada’s prime rate reached a record high of 22.75% in 1981 and fell to a low of 2.25% in 2009.

From March 2020 — the start of the COVID-19 pandemic — through June 10, 2026, Canada’s prime rate ranged from 2.45% to 7.20%.

In March 2020, financial institutions lowered their prime rates three times after the Bank of Canada cut its target overnight rate to support the Canadian economy during the pandemic. By the end of that month, the prime rate had fallen to 2.45%, where it remained until March 2022.

The prime rate then rose rapidly as the Bank of Canada increased its policy rate to help control inflation. After several increases in 2022, the Bank raised its policy rate three more times in 2023, pushing the prime rate from 6.70% in January 2023 to 7.20% in July 2023.

The prime rate remained at 7.20% until June 2024, when the Bank of Canada began cutting rates. Additional cuts in July, September, October and December 2024 lowered the prime rate to 5.45% by the end of 2024.

In 2025, the prime rate fell further, reaching 4.45% after the Bank of Canada’s October 2025 rate cut. The Bank then held its policy rate steady at five consecutive announcements — December 10, 2025; January 28, March 18, April 29 and June 10, 2026 — leaving Canada’s prime rate unchanged at 4.45% as of June 10, 2026.

The prime rate has a direct correlation with rates lenders charge for a number of loans and lending products.