Royal Bank of Canada didn’t waste much time following the Bank of Canada’s lead, announcing early Wednesday afternoon it will raise its prime rate half a percentage point to 3.2 per cent, effective Thursday. Soon after RBC’s announcement, TD Canada Trust, Bank of Montreal, Canadian Imperial Bank of Commerce and Bank of Nova Scotia matched with equal-sized prime-rate hikes.  

Prime is the key rate that underpins a slate of lending products, including variable-rate mortgages and lines of credit.

The move comes on the heels of the central bank’s first supersized rate increase in 22 years, as the Bank of Canada increased its benchmark rate by half a percentage point Wednesday to one per cent. The central bank has been grappling with how to quell sky-high inflation, which is currently running at its highest level in three decades.

The Bank of Canada also raised its view of the nominal neutral rate – essentially the rate where monetary policy neither impedes growth nor adds fuel to the fire – to 2.5 per cent, indicating long-term rates will need to be higher than previously expected.

Those moves will be felt in short-order by anyone searching for a variable-rate mortgage, as purchasing power is diminished. According to, Wednesday’s rate hike equates to a $2,232-per-year increase on the mortgage payments due on an average Canadian home priced at $860,000.