Rates and interest
Policy interest rate
The Bank of Canada's target for the overnight rate, announced 8 times a year, which anchors prime.
Also called overnight rate, Bank of Canada rate.
The policy rate is the Bank of Canada's target for the rate at which major financial institutions lend to each other overnight. It anchors short-term borrowing costs across the economy, and lenders set prime with reference to it.
It doesn't set mortgage rates directly. Variable mortgages follow prime, which follows the policy rate. Fixed mortgages follow the bond market, which prices in expectations and often moves before an announcement instead of after it.
Announcements happen on 8 fixed dates a year, and 4 of them come with a full Monetary Policy Report. Between scheduled dates, the Bank only moves in extraordinary circumstances.
If you're within 120 days of a renewal, it's worth knowing the announcement calendar. If you're not, a rate hold protects you either way.
Related terms
Prime rate
Each lender's own reference rate for variable lending, set with reference to the Bank of Canada's policy rate.
Variable rate
A rate set as prime plus or minus a discount, which moves when prime moves while your discount stays locked for the term.
Fixed rate
An interest rate that stays the same for your whole term, compounded semi-annually as the Interest Act requires.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
Sharp rates. The full picture.
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