Rates and interest
Prime rate
Each lender's own reference rate for variable lending, set with reference to the Bank of Canada's policy rate.
Prime is the rate your variable mortgage and your line of credit are priced from. Each lender sets its own prime rate. In practice the big banks move together within a day or two of a Bank of Canada decision, and prime has historically sat about 2.2 percentage points above the policy rate.
That gap is a convention, and no law sets it. Lenders have widened it before when their funding costs moved independently of policy. Your mortgage contract refers to your lender's prime, so the formula on your commitment matters more than the headline number.
A variable mortgage at prime minus 0.90% locks in the 0.90% discount for the whole term. Prime itself can change at any time.
A HELOC has no term to soften the effect. Prime plus your spread is the rate, and it changes the month prime changes.
Related terms
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.
Home equity line of credit (HELOC)
A revolving line of credit secured against your home, priced at prime plus a spread and capped at 65% of value on its own.
Policy interest rate
The Bank of Canada's target for the overnight rate, announced 8 times a year, which anchors prime.
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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