Mortgage solution
Prime rate
Prime isn’t a rate you get. It is the reference that variable rates and home equity lines are calculated from.
What it is
Prime is the reference rate each bank announces publicly. No law sets it and the Bank of Canada doesn’t either, but it tracks the Bank closely: when the policy rate changes (at eight scheduled dates a year), the large banks adjust their prime within days, usually by the same amount. For several years it has sat roughly two points above the policy rate.
What it touches directly
A variable-rate mortgage reads “prime minus X” or “prime plus X”, and a home equity line of credit almost always “prime plus X”. Either way, the spread is negotiated once and stays put. Prime is what moves your rate. A fixed-rate mortgage isn’t tied to it during its term.
Prime is not the rate you will pay
Two lenders with the same prime can offer very different variable rates, because the discount differs. Compare the spread against prime (and the conditions attached to it), not the reference figure. Current market rates are on the mortgage rates page.
What a rise changes in practice
On a $400,000 balance, each quarter point of prime is roughly $1,000 of interest a year. Forget guessing the Bank of Canada’s next decision. Ask whether your budget absorbs a one-point rise without cutting anything. If it does, a variable tied to prime keeps its advantages. If not, a fixed rate buys predictability.
Documents to gather
What the lender will ask for.
- Discount negotiated against prime
- Products tied to prime in your file
- Effect of a one-point rise on the payment
- Upcoming Bank of Canada decision dates
- Home equity line of credit, if any
- Fixed versus variable for the same term
Frequently asked
Is prime the same at every bank?
Almost always. The large banks announce the same prime and adjust it at the same time. What differs is the discount each one gives you against it.
Does prime change my fixed rate?
No. A fixed rate is locked for its term, whatever prime does. Prime only matters for variable products and home equity lines.
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