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Historically prime rate has referred to the interest rate banks charged their most credit-worthy customers or corporations. That is not always the case today.

Today it is generally a reference rate upon which other rates are quoted. For example, fluctuating variable rates and lines of credit usually have rates that are based on prime +/- a specified percentage (e.g.  Prime – 0.75% or Prime + 0.50%).

Prime rate is closely linked to the Bank of Canada’s overnight rate. Prime rate generally rises and falls with the overnight rate, but not always. All lenders set their own values for this rate but they generally match the major banks.

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