1. What Is RBC Prime Rate?

The RBC Prime Rate is Royal Bank of Canada's benchmark lending rate, used as a reference for various loans and credit products including variable-rate mortgages, lines of credit, and business loans.

2. How Is RBC Prime Rate Calculated?

The calculator uses the RBC Prime Rate formula:

Where:

• \( BoC\ Overnight\ Rate \) — Bank of Canada's policy interest rate (%)
• \( 3\% \) — Typical spread added to determine prime rate

Explanation: The RBC Prime Rate is directly tied to the Bank of Canada's overnight rate with a standard 3% spread that covers the bank's costs and profit margin.

3. Importance Of RBC Prime Rate

Details: The RBC Prime Rate serves as a key benchmark for consumer and commercial lending rates across Canada. Changes in the prime rate directly affect borrowing costs for millions of Canadians.

4. Using The Calculator

Tips: Enter the current Bank of Canada overnight rate in percentage. The spread is pre-set to 3% but can be adjusted if needed. Both values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: How often does RBC change its prime rate?
A: RBC typically changes its prime rate following Bank of Canada overnight rate announcements, which occur eight times per year.

Q2: Is the 3% spread always fixed?
A: While 3% is the standard spread, it can vary slightly during extraordinary economic conditions, though this is rare.

Q3: What types of loans use the prime rate?
A: Variable-rate mortgages, home equity lines of credit, personal lines of credit, and many business loans are typically priced at prime plus a margin.

Q4: How does RBC Prime compare to other banks' prime rates?
A: Most major Canadian banks maintain identical prime rates, though they may change at slightly different times following BoC announcements.

Q5: Can individuals negotiate below prime rate?
A: For most consumer products, prime rate is standard. However, premium clients or large commercial borrowers may sometimes negotiate rates below prime.