Glossary
Bank Rate
The Bank of Canada's rate for overnight loans to financial institutions, set above the policy rate and at the top of the operating band..
The Bank Rate is the interest rate the Bank of Canada charges financial institutions for overnight loans made through its standing liquidity facility. It sits at the top of the Bank's operating band, above the target for the overnight rate — the policy interest rate that the Bank's governing council sets on fixed announcement dates.
It is a wholesale backstop rate between the central bank and the financial system. It is not a consumer rate, and no lender offers a mortgage priced at the Bank Rate.
How the Bank Rate fits into the operating band
The Bank of Canada implements monetary policy by setting a target for the overnight rate and surrounding it with an operating band. Two standing facilities keep the market rate inside that band:
- The Bank Rate is the upper bound — the rate at which eligible financial institutions can borrow settlement balances from the Bank of Canada against collateral.
- A deposit rate at the lower bound pays institutions on balances they leave on deposit.
Because a participant can always borrow at the Bank Rate or deposit at the lower rate, the actual overnight rate — measured by CORRA — normally trades inside the band. The Bank Rate therefore acts as a ceiling rather than an everyday price.
Why it matters to mortgage borrowers
The Bank Rate influences mortgages indirectly. When the Bank of Canada changes its target for the overnight rate, the prime rate that commercial banks charge usually moves in step. Variable-rate mortgages are quoted as prime plus or minus a spread, so a policy change can shift payments or stretch the amortization period on an adjustable-rate mortgage. Fixed-rate mortgages are driven more by Government of Canada bond yields and market expectations than by the Bank Rate itself.
That indirect chain is why headlines about the Bank Rate matter to homeowners even though no borrower pays it directly. It is also bound up with the qualifying rate used in the federal mortgage stress test, which is set well above typical contract rates.
Bank Rate compared with related rates
- Bank Rate — the central bank's lending ceiling, set above the policy rate.
- Policy interest rate — the target for the overnight rate, at the centre of the band.
- CORRA — the measured overnight benchmark, which floats within the band.
- Prime rate — a commercial lending rate set by each bank and quoted to consumers.
Confirm current figures on the Bank of Canada's website, since the band and its components sit inside a monetary policy framework that is reviewed periodically.
Frequently asked questions
What is the Bank of Canada Bank Rate?
It is the rate the Bank of Canada charges eligible financial institutions on overnight loans through its standing liquidity facility. It sits at the top of the central bank's operating band, above the target overnight rate, and works as a ceiling for the overnight market rather than a rate consumers are charged.
Is the Bank Rate the same as the policy interest rate?
No. The policy interest rate is the Bank of Canada's target for the overnight rate, at the centre of the operating band. The Bank Rate is the upper bound of that band, set above the target. Headlines often use "the Bank of Canada rate" loosely to mean the target, so check which one is meant.
Does the Bank Rate affect my variable mortgage?
Indirectly. Lenders set their prime rate based on the policy rate, and variable mortgages are priced as prime plus or minus a spread. When the Bank of Canada changes the target, prime often moves, which can change your payment or amortization. The Bank Rate itself is never charged to borrowers.
Sources
Related terms
- Policy Interest Rate — The Bank of Canada's target for the overnight rate, which anchors short-term borrowing costs and influences Canadian mortgage pricing.
- Overnight Rate — The rate at which large financial institutions lend each other funds for one day, guided in Canada by the Bank of Canada's target for the overnight rate.
- Prime Rate — The prime rate is the interest rate Canadian banks charge their most creditworthy borrowers, and it is the benchmark used to price variable-rate mortgages and lines of credit.
- CORRA — CORRA, the Canadian Overnight Repo Rate Average, is a benchmark interest rate published by the Bank of Canada from overnight secured repo transactions.
- Variable-Rate Mortgage — A mortgage whose interest rate rises and falls with the lender's prime rate during the term instead of staying fixed.