Definition
The prime rate is the reference rate each Canadian bank sets for its best commercial clients. It is typically aligned within 2 basis points across the Big 6 and moves in lockstep when the Bank of Canada changes its policy rate.
For mortgages, variable rates are quoted as "prime ± spread" (e.g. "prime – 0.75%"). When the Bank of Canada cuts its policy rate by 25 bps, banks usually cut their prime rate by the same amount — and your variable rate follows, reducing the interest portion of your payment.
The prime rate is not a national legal rate: each bank sets its own. In Canada in 2026, the Big 6 + Desjardins maintain de facto alignment. A historical exception was 2015, when banks only passed through 15 of the 25 bps cut from the Bank of Canada.