Key Takeaway

Canada’s six largest banks lowered their prime lending rates by 25 basis points to 5.70 per cent on July 10, 2026, immediately following the Bank of Canada’s decision to reduce its policy interest rate. If you hold a variable-rate mortgage or a home equity line of credit (HELOC), your interest charges will decrease automatically. Fixed-rate mortgage holders are not affected by this change, as their rates are locked in for the term.

What Happened

The Bank of Canada announced a 25-basis-point reduction to its overnight policy rate in its July 2026 interest rate decision. Within hours, Royal Bank of Canada, TD Bank, Scotiabank, BMO, CIBC, and National Bank all matched the cut by lowering their prime rates from 5.95 per cent to 5.70 per cent (Bank of Canada, 2026).

The prime rate is the benchmark interest rate that Canadian banks use to set rates on variable-rate mortgages, HELOCs, and certain personal loans. When the Bank of Canada adjusts its policy rate, the major banks typically move their prime rates in lockstep.

Who Benefits from the Rate Cut

Variable-rate mortgage holders: If your mortgage has a variable rate, your interest cost will drop by 25 basis points. On a mortgage with a $400,000 balance, this reduction translates to roughly $83 per month in lower interest charges, though the exact savings depend on whether you have an adjustable-rate mortgage (where the payment changes) or a fixed-payment variable-rate mortgage (where more of your payment goes toward principal).

HELOC borrowers: Home equity lines of credit are typically priced at prime plus a margin. With the prime rate now at 5.70 per cent, your HELOC rate drops immediately. If your HELOC was charged at prime plus 0.5 per cent, your new rate is 6.20 per cent, down from 6.45 per cent.

Fixed-rate mortgage holders: This rate cut does not affect your current mortgage payment or interest rate. Your rate is locked in for the duration of your mortgage term. However, if you are approaching renewal in the coming months, you may benefit from lower fixed rates if the bond market anticipates further policy rate cuts.

Why the Bank of Canada Cut Rates

The Bank of Canada adjusts its policy rate to keep inflation within its target range of 1 to 3 per cent and to support economic growth. According to the Financial Consumer Agency of Canada, changes to the policy rate influence borrowing costs across the economy, which in turn affects consumer spending and investment (FCAC, 2026).

Read also: What a Bank of Canada Rate Hold Means for Buyers, Sellers and Mortgages in Canada

A rate cut signals that the central bank sees room to stimulate economic activity or is confident that inflation pressures have eased. The specific economic factors behind the July 2026 decision include recent inflation data, employment trends, and global economic conditions.

What to Do Next

Review your mortgage statement: Variable-rate mortgage holders should confirm that the rate reduction appears on their next statement. Most lenders apply the change automatically, but it is worth verifying.

Consider your renewal options: If your mortgage term is ending soon, compare whether locking into a fixed rate or staying variable makes sense given the current rate environment. Rates change frequently, so consult a licensed mortgage broker for advice tailored to your situation.

Reassess prepayment plans: With lower interest costs, you may have more room in your budget to make extra payments on your mortgage principal, if your mortgage terms allow it. Check your prepayment privileges and any penalties before acting.

Avoid rash refinancing decisions: A single 25-basis-point cut does not automatically justify refinancing a fixed-rate mortgage. Breaking a fixed-rate mortgage early can trigger a significant prepayment penalty, often calculated using the interest rate differential (IRD) method. Run the numbers with your lender before making a move.

Disclaimer

This article provides general educational information about interest rate changes in Canada and is not personalized financial, mortgage, or legal advice. Mortgage rates, eligibility, prepayment options, and penalties vary by lender, province, and your individual circumstances. The prime rate and the Bank of Canada policy rate change frequently. Consult a licensed mortgage broker or your financial institution to confirm current rates and to determine the best mortgage strategy for your situation. Do not rely solely on this article when making financial decisions.