Prime Rate Explained: How It Affects Your Mortgage

You have a variable-rate mortgage quoted as "prime minus 0.50%" and just heard the Bank of Canada cut rates. Will your payment drop? By how much? Understanding the prime rate—and how it flows through to your mortgage—helps you anticipate changes and plan accordingly.

What Is the Prime Rate?

The prime rate is the interest rate that banks use as a benchmark for variable-rate lending products. When you see a variable mortgage quoted as "prime minus 0.50%," your rate is calculated from this benchmark.

Current prime rate: Major banks typically set prime at 2.20% above the Bank of Canada overnight rate.