Prime Rate Changed to 2.85%. Slow Clap.

Luisa Hough • January 28, 2015

It’s official, as of today all the big Canadian banks have now lowered their prime rate. RBC was the first to announce they would drop their prime rate by .15% to 2.85%. BMO, TD and CIBC quickly followed with drops of their own, then the ScotiaBank and National Bank fell off the fence and landed at 2.85% as well. This is good news.

If you are a current variable rate mortgage holder, you are now paying less interest on your mortgage. Congratulations.

However, this is really only a half measure. The Bank of Canada dropped their overnight rate by .25% whereas the banks only lowered prime by .15%.

“We believe our announcement is a balanced approach which reflects our actual cost of funds and helps clients save money on products such as variable rate mortgages, lines of credit and floating rate loans,” RBC said in a statement. Hmmm…

3 Sides of the Coin

What to do, what to do? As all the pundits looked in, it appeared the banks really only had 2 choices, flip a coin, would they stay put or lower rates? However it would appear the banks found the middle ground and added a third side to the coin.

Side One. Don’t Move.

By lowering the overnight rate, the Bank of Canada reduced the costs of doing business for the banks. Had banks kept prime rate at 3%, they would have reaped all the benefits of the drop that was intended to stimulate the economy. The only stimulus would have been to bank’s shareholders.

The problem with not making a move would be the public outcry and the countless media stories about corporate greed and corruption that would no doubt follow. And rightfully so.

Side Two. Drop by .25%.

Usually when the overnight rate changes, all the banks follow suit in full measure without delay. Up or down. However as this is the first time in just over 4 years that the overnight rate moved, it wasn’t a quick and easy decision.

A full drop of .25% would have been consistent with past drops and most preferable in the public’s eye, but in the boardroom of every bank it would be a different story. Obviously banks want profitability, by simply passing on the rate drop to Canadians, from the bank’s perspective, it would be a missed opportunity to increase their bottom line.

Side Three. Take A Half Measure.

While not dropping prime rate elicits cries of corporate greed, and while dropping it by .25% is seen as a missed opportunity by bankers united… taking a half measure and dropping prime by .15% is actually quite brilliant.

Well played RBC, well played. For this you deserve a slow clap. Variable rate mortgage holders get their interest relief as prime goes down, and the banks get a little more profitability in the mean time. It was such a good idea that all the banks followed suit.

 

There may be a few groans about how the change should have been bigger going forward, but most likely this whole thing will become back page news in the next couple of days and all will be forgotten.

Now as broker channel lenders base their variable rate mortgages off the bank’s prime rate… regardless where your mortgage is at, if you are a current variable rate mortgage holder, you can expect to see a letter in the mail soon outlining the changes to your mortgage. If you want to talk it through with me, I am always available.

Let me leave you with this…

The real test will be what happens when the Bank of Canada increases the overnight rate? Will the banks take a half measure when increasing their rates? Probably not.

Recent Posts

Stress-Testing Your Mortgage Affordability: Why It Matters

By Luisa & Candice Mortgages • June 17, 2026
Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.

Bank of Canada Holds Rate at 2.25% — June 10, 2026

By Luisa & Candice Mortgages • June 10, 2026
The Bank of Canada announced today that it is maintaining its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. For Canadian homeowners, buyers, and anyone with a mortgage on the horizon — here's what you need to know.

What to Expect in the Closing Process: A Step-by-Step Guide

By Luisa & Candice Mortgages • June 3, 2026
You’ve found the right home, your offer’s been accepted, and your financing is approved—congratulations! But before you can pick up the keys and celebrate, there’s one more important stage: the closing process. Closing is the final step in your homebuying journey, where all the paperwork, legal details, and financial transactions come together. It can feel overwhelming if you don’t know what to expect, but with the right preparation, closing can be smooth and stress-free. Here’s a step-by-step guide to help you understand the process. Step 1: Hire a Lawyer or Notary A real estate lawyer (or notary, depending on your province) handles the legal side of closing. They will: Review the purchase agreement and mortgage documents Conduct a title search to confirm the seller has the legal right to sell the property Ensure the mortgage lender is properly registered on the title Handle the transfer of funds between you, the lender, and the seller Your lawyer or notary will be your main point of contact during closing, so choose one you trust and who communicates clearly. Step 2: Finalize Your Mortgage Your lender will send the mortgage instructions directly to your lawyer or notary. At this stage: You’ll provide proof of property insurance (lenders require this before releasing funds) You’ll confirm your down payment and closing costs are available in your lawyer’s trust account The lawyer will prepare all documents for your review and signature Step 3: Pay Closing Costs Closing costs typically range from 1.5% to 4% of the purchase price. These can include: Legal fees Title insurance Land transfer tax (where applicable) Adjustments for property taxes or utilities prepaid by the seller Home inspection or appraisal fees (if not already paid) Your lawyer will provide a final statement of adjustments so you know exactly how much is due on closing day. Step 4: Sign the Paperwork A few days before closing, you’ll meet with your lawyer or notary to sign all the necessary documents, including: Mortgage agreement Title transfer Insurance confirmations Statement of adjustments Bring valid government-issued ID to this appointment. Step 5: Transfer of Funds On the day of closing: Your lender sends the mortgage funds to your lawyer Your lawyer combines these funds with your down payment and pays the seller Legal ownership of the property is transferred into your name The lender is registered on title as a secured creditor Step 6: Get the Keys! Once the paperwork is filed and the funds have cleared, your lawyer will confirm that the transaction is complete. You’ll then get the keys to your new home—officially making it yours. The Bottom Line The closing process is a series of important steps, but with the right team in place, it doesn’t have to be stressful. By working closely with your mortgage professional and lawyer, you’ll have guidance every step of the way—from signing the documents to turning the key in the front door. If you’d like help preparing for the closing process—or want a clear breakdown of your own closing costs— connect with us today.

Luisa & Candice Mortgages 

Contact Me Anytime!

The best way to get ahold of me is to submit through the contact form below. However feel free to give me a shout on the phone as well.

Contact Us