Prime Rate
Quick Summary
A benchmark rate used by banks to price many variable-rate loans (often shown as “Prime + X%”).
ELI5 Explanation
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It’s the “base rate” — your rate is usually prime plus an extra amount.
Detailed Explanation
Prime rate is a reference rate set by major banks and tends to move when the Bank of Canada changes its policy rate. Many mortgage quotes are expressed as Prime plus (or minus) a spread. In private lending, short-term bridge loans are often priced as Prime + 2% to Prime + 5%.
Example
If Prime is 6.95% and your loan is Prime + 3%, your interest rate is 9.95%.
Why It Matters
If your loan is tied to prime, your interest cost can change over time.