Today's Prime Rate: 4.70%

Prime Rates Soar to 4.70% Amid a Historic 100 Basis Point Rate Hike

The Bank of Canada announced on July 13, 2022, that they will be increasing their policy interest rate by a staggering 100 basis points, bringing it from 1.50% to 2.50%. That's the largest single rate hike by the Bank of Canada since 1998. This will cause prime rates in Canada to increase by 1.00% to 4.70%, the highest it has ever been since 2008.

Highlights of the Bank of Canada’s latest interest rate announcement includes:

  • Prime rates will be rising at Canada’s major banks to 4.70%, up 100 bps from the current prime rate of 3.70%.
  • Persistently high CPI inflation has prompted this stunning rate hike, as inflation remains stubbornly close to a 40-year high of 7.7%. That’s above the Bank of Canada’s forecast of around 6% for the first half of 2022.
  • Canada’s unemployment rate fell to 4.9% in June 2022, a record low, even as 43,000 jobs were lost. That’s due to a labour force that shrunk by 100,000.
  • Quantitative tightening (QT) began on April 25, 2022. This will gradually reduce the Bank of Canada’s balance sheet and cause upward pressure on fixed mortgage rates.
  • Housing prices in Canada have slumped in many markets across the country over recent months, in response to the rising cost of borrowing and slowing demand.

The Bank of Canada’s policy interest rate has increased by 100 basis-points amid a backdrop of high inflation, elevated housing prices, and a strong labour market. An increase in the Bank of Canada’s policy interest rate will mean that prime rates at Canada’s major banks will also increase. Prime rates will be increasing to 4.70% at Canada’s major banks, which will have an immediate impact on those with variable-rate mortgages, HELOCs and lines of credit.

Meanwhile, sales and home prices in Canada’s housing market have slipped over the past few months as interest rates soar. Further rate hikes will continue to cool prices and dampen demand across the country.

RBC's interest rate forecast in June predicted that the Bank of Canada's policy rate will end the year at 2.50%, which is now right at the current policy rate of 2.50%. That’s in spite of it still being higher than what RBC originally forecasted in April 2022, when they expected the policy rate to only reach 2.00% by the end of the year. The rapid pace of rate hikes that the Bank of Canada is setting has outpaced even the forecasts of major banks. The next interest rate announcement will be on September 7, 2022, at 10 a.m. ET, when another rate hike of at least 25 basis points is expected.

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