BoC vs. Bank Prime:
Why They’re Not the Same
(and Why It Matters for Your Mortgage)

At Loft, we’re all about making sense of these moving parts so you can make the best decision for your home and your family.

Got questions about how today’s rates impact you? BOOK A CALL WITH US and we’ll walk you through your options — no jargon, no stress.

Welcome Home.

Policy rate = economic steering wheel.
Prime = what you actually pay on your loan or mortgage.
Fixed rates = their own lane, driven more by bond yields.

The Quick Takeaway



 

Here’s where people often get confused:

Variable rates: Move up or down with prime (which follows the BoC policy rate).
Fixed rates: Don’t change in lockstep with prime. They’re influenced more by bond markets and global economic trends than by the Bank of Canada’s decisions.

So if you hear, “The Bank of Canada just cut rates!” it doesn’t automatically mean fixed rates are coming down. But it almost always means prime (and therefore variable rates) will adjust soon after.

So What About Fixed Rates?



 

This is the one you actually feel in your mortgage payment.

Who sets it? Individual banks (but they almost always move in sync).
When does it change? Usually a day or two after the Bank of Canada changes its policy rate.
How is it calculated? It typically sits about 2.20%–2.25% higher than the policy rate.

👉 Example: If the Bank of Canada policy rate is 2.50%, most banks will set prime around 4.70%.

Bottom line: Prime is the “retail” rate tied to your variable-rate mortgage, HELOC, and line of credit.



 

The Prime Lending Rate (a.k.a. Bank Prime)



 

Think of this as the “wholesale” rate between banks.

Who sets it? The Bank of Canada.
What does it do? It’s the steering wheel for the economy.
If inflation is running hot, they raise the rate to cool things down.
If growth is slowing, they lower the rate to encourage borrowing.
Who does it affect directly? Big financial institutions lending to each other overnight.
Who does it affect indirectly? Pretty much everyone in Canada — because it sets the foundation for all borrowing costs.

Bottom line: The policy rate is the starting point, not the finish line.



 

The Bank of Canada Policy Rate (Overnight or Key Rate)



 

We get this question all the time: “Isn’t the Bank of Canada’s rate the same as the bank’s lending or prime rate?”
Not quite — and the difference can make a big impact on your mortgage.

Let’s break it down, Loft style 👇