Prime Rate
Learn what the prime rate is in Canadian real estate, how it influences mortgage rates, and what it means for borrowers with variable-rate loans.
May 22, 2025
What is the Prime Rate?
The prime rate is the benchmark interest rate set by major Canadian banks, used as the basis for determining variable interest rates on loans and lines of credit.
Why the Prime Rate Matters in Real Estate
In Canadian real estate, the prime rate directly affects borrowing costs for variable rate mortgages, Home Equity Lines of Credit (HELOCs), and personal loans. It is influenced by the Bank of Canada’s overnight lending rate and typically adjusts several times a year in response to monetary policy.
Key features of the prime rate:- Published by major financial institutions (e.g., RBC, TD)
- Used to price variable loans (e.g., Prime - 0.5%)
- Responds to economic conditions like inflation or growth
Borrowers with variable-rate mortgages or floating-rate HELOCs will see their interest rates fluctuate as the prime rate changes. Conversely, fixed-rate mortgages are not directly tied to the prime rate but may still be influenced by related bond yields.
Understanding the prime rate helps buyers assess interest risk, choose between fixed or variable products, and anticipate changes in monthly payments over time.
Example of the Prime Rate in Action
A borrower with a variable-rate mortgage at Prime - 0.75% sees their rate increase from 4.70% to 5.20% after the prime rate rises by 0.5%.
Key Takeaways
- Base rate for variable loans in Canada.
- Adjusted by banks based on Bank of Canada policy.
- Affects mortgages, HELOCs, and credit lines.
- Impacts affordability and payment amounts.
- Important for borrowers with variable products.
Related Terms
- Variable Rate Mortgage
- Bank of Canada Rate
- HELOC
- Interest Rate
- Mortgage Term
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
Highlights from the Delta Golf & Country Club listing brochure. (Colliers)
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
