Prime Lending Rate

The prime lending rate is the interest rate that commercial banks charge their most creditworthy and lowest-risk customers, typically large corporations. It is often used as a benchmark for various types of loans, including business loans, mortgages, and consumer loans. The prime rate is influenced by the central bank’s interest rate policies; in Canada, for example, it is closely tied to the Bank of Canada’s key interest rate. When the central bank raises or lowers its rate, the prime lending rate usually follows suit, affecting borrowing costs across the economy.