The prime interest rate is a benchmark for other types of interest rates, including mortgage and auto loan rates. The prime rate is determined by banks and other lenders as an indicator of their overall costs in making loans. It also serves as a point of comparison for lenders offering other types of consumer loans.

Prime Interest Rates

The prime interest rate is the benchmark or reference interest rate used by banks to set their own borrowing and lending rates. The bank base rate of Canada’s five major banks, for example, is currently set at 2%.

The prime rate is not necessarily reflective of the national economy or an individual borrower’s creditworthiness; rather, it reflects general economic conditions and market forces in Canada as well as other countries around the world where Canadian banks operate. As such, changes in the global economy can cause fluctuations in prime rates even if …