Whether you’re looking for a personal loan, car loan, mortgage, savings account or investment option, understanding bank interest rates in Canada will impact what the best options are for your money.
In this guide, we’ll show you how to compare bank interest rates and high-interest savings accounts from other financial institutions to get the best bang for your buck.
What is the Bank of Canada interest rate?
The current Bank of Canada benchmark interest rate is 5%. That results in a current bank prime rate offered by banks across Canada of 7.2%. The next time we’ll hear about any potential rate changes from Canada’s central bank will be on April 10, 2024.
When will the Bank of Canada lower interest rates?
Although the Bank of Canada’s hasn’t revealed a definite timeline for when it plans to lower interest rates, according to econometric models, it’s predicted that Canada’s overnight interest rate will hover around 3.50% in 2024 and 3.00% by 2025.
The Bank of Canada increased its benchmark interest rate seven times in 2022 and three times in 2023 after holding it steady in 2021 following lower rates during the pandemic. At this point we’re seeing the highest Bank of Canada benchmark rate in over two decades. In 2024 so far, rates have been held steady.
What are the different types of interest rates?
Banks in Canada describe interest rates differently depending on the financial product. Here’s a breakdown of the two types of interest rates you’ll come across in Canada:
APR. This is the bad kind of interest. The APR (annual percentage rate) is the amount of interest you have to pay each year on your debts, for example your mortgage. To save the most money on your mortgages or loans, look for loans and credit cards with a low APR.
APY. This is the good kind of interest. APY stands for annual percentage yield, and it’s the amount of interest that gets paid to you each year on your savings. It can also be called earned annual interest (EAR). To help your money grow faster, look for savings accounts and investments with a high APY. Compare savings account interest rates.
Whether you’re earning or paying interest, the interest rate you’re offered will be one of these two options:
Fixed-rate. These interest rates stay the same for a predetermined period of time — like until you’re finished paying of a loan. With a fixed interest rate, you get the peace of mind of knowing exactly how much your interest rate will be.
Variable-rate. These interest rates may fluctuate over time. Banks adjust their prime rate a few times throughout the year based on how the Bank of Canada’s policy interest rate changes. This means you’ll get lower interest rates if the prime rate falls and higher rates should when the prime rate rises again.
When financial institutions calculate the interest on your savings, investment or loan, they’ll use one of two methods based on the type of interest you’re offered:
Compound interest. This is calculated based on the principal plus interest you’ve already accumulated.
Simple interest. This is calculated based only on the principal.
How is interest charged on different financial products?
Interest works differently depending on the type of product you have. A good rule of thumb is that savings accounts and GICs offer an APY, while personal loans, mortgages and credit cards charge APR.
Learn more about what interest rates look like for each product below:
The the interest rates on savings accounts earn you money rather than cost you money. If you have a high-interest savings account, the interest will be variable. That means the financial institution that provides the account can raise or lower your interest rate in line with their prime rate, so the amount of interest you earn could vary from month to month.
Savings account interest is typically calculated daily on your balance and paid into your account monthly. This is referred to as compound interest: the interest payments you earn then go on to earn their own interest.
If you invest in a guaranteed investment certificate (GIC) or term deposit, the interest rate will typically be fixed until the end of the term. This gives you the security of knowing you will get a guaranteed return on your investment. But some GICs come with variable interest rates if you want to benefit from any potential interest rate rises.
Special offers and high introductory interest rates can be a great way to boost your savings balance. Here are a few Canadian bank interest rate offers available now that have caught our attention:
Compare bank interest rates in Canada for May 2024
Where can you find the best savings account interest rates in Canada? Here we’ve summarized details of savings accounts interest rates from the Big Banks as well as challenger banks, fintechs and credit unions.
Get a Smart Interest of 0.50% on balances up to $200,000 when you save $200 or more in a month (limits apply), and a bonus rate of 5.75% (for 4 months).
Earn 5.50% interest when you open both a BMO Performance Chequing Account and a BMO Savings Amplifier Account. Plus, earn up to a $600 opening bonus with the chequing account. Valid until July 2, 2024.
The card offers 1% cash back on gas and groceries, 3% cash back on streaming and food delivery services, and an average of 5% cash back at restaurants, cafes and bars.
Get a 5.50% promotional rate on the Jumpstart High Interest Savings account until July 9, 2024. Eligible on new deposits only. Conditions apply.
$0 monthly fee
Rates last verified on May 3, 2024
Why it’s important to find the best savings account interest rates in Canada
The higher the interest rate, the harder the money in your savings account works for you. And while a small difference in interest rates might not look like much on paper, it can make a big difference to your bank balance over the course of several months or years.
Let’s say you’re saving for a deposit on a home. You have $5,000 already, and you’re going to deposit $100 of your paycheque into a HISA every week. As you can see in the table below, an interest rate of 5% instead of 4% will help you save an extra $429 over the course of 3 years.
Savings account 1
Savings account 2
Interest rate
4%
5%
Initial deposit
$5,000
$5,000
Weekly deposit
$100
$100
Balance after 1 year
$10,511
$10,591
Balance after 3 years
$22,218
$22,647
Difference
–
+$429
Types of savings account interest rates in Canada
When you’re comparing bank interest rates on savings accounts, it’s important to be aware that different types of interest rates may apply. These include:
Bonus interest rate. Some savings accounts pay a base rate of interest, but allow you to earn bonus interest every month that you meet specific requirements. For example, you may be able to earn bonus interest if you deposit $200 into your account each month.
Introductory interest rate. Some banks offer promotional interest rates to attract new customers. These high promo rates apply for a limited introductory period, such as six months, before the account reverts to a lower standard rate.
Tiered interest rate. Some high-interest savings accounts have tiered interest rate structures — the higher your balance, the higher your interest rate. The thing to remember with this type of account is that you might not always qualify for the highest advertised rate, so it’s important to read the fine print.
GIC rates in Canada for a 1-year GIC is 4.40%, for a 3-year GIC is 3.92% and for a 5-year GIC is 3.95% according to the Bank of Canada, which takes this data from the weekly posted rates from the six major chartered banks (as of May 1, 2024).
In Canada, GIC rates are offered as fixed, laddered fixed-rate, variable or market-linked. Your return and the rate you’re offered are dependent both on the type of interest rate structure and term length of the GIC you choose. While GIC rates are often higher than what you could get with a savings account from a standard bank, they won’t offer the same rate of return as you can typically get from investing in stocks and ETFs.
According to Statistics Canada via the Bank of Canada, the average interest rate for personal loans in Canada is currently 9.42%.
Personal loan interest rates can be fixed or variable annual interest rates. The bank loan interest rate you qualify for will depend on factors such as your credit score and credit history, your income and any existing debts you may have. The lender will also take into account the size of the loan and the loan term when setting your interest rate.
The current average interest rate for a mortgage in Canada is 6.05% for uninsured mortgages and 5.90% for insured mortgages.
The weekly posted conventional mortgage rates from the six major chartered banks in Canada are 7.84% for a 1-year mortgage, 6.99% for a 3-year mortgage and 6.84% for a 5-year mortgage, according to the Bank of Canada (as of May 1, 2024).
Mortgage interest rates can be fixed or variable. Fixed interest rates are guaranteed not to change, whereas variable rates may fluctuate. The interest you’re charged will generally be calculated daily.
Mortgage payments can either be principal and interest — meaning you’re repaying both the interest you’re being charged and the original amount you borrowed — or interest-only. With the latter, you’re only repaying the interest accruing on your debt for a set period, such as five years, before the loan reverts to a principal and interest mortgage.
When interest rates rise, you pay more on your monthly mortgage repayments. On the flipside, you’ll end up paying less each month if rates fall.
The key interest rate you need to monitor is the Bank of Canada’s policy rate, which is adjusted eight times per year. This is the benchmark rate lenders use when setting interest rates for their mortgages and other loans, so changes to the policy rate are usually soon reflected in home loan rates.
To give you an idea of the impact of interest rate changes in the real world, let’s look at an example. If you have a $500,000 mortgage with a 30-year term and an interest rate of 6%, your monthly payment will be $2,998. But if your interest rate increases by 0.25%, your monthly payment will rise to $3,079 — that’s an extra $81 per month.
Car loan interest rates
The average auto loan interest rate in Canada is currently 8.09%.
Car loan interest rates can be either fixed or variable. The bank car loan interest rate you’re approved for will depend on whether the car is used or new, your credit score and other personal financial factors. To qualify for the lowest auto loan rates – including any 0% financing offers – you’ll have to have an excellent credit score and meet specific criteria.
Credit cards rates vary depending on what features the card offers, but the average card falls somewhere between 15% and 22% APR with most cards charging 19.99%. While it’s possible to find credit cards with variable APRs, the majority of credit cards offered by banks in Canada have a fixed interest rate.
There are two types of interest rates on a credit card: purchase rate and cash advance rate. The purchase rate is what you’re charged when you make purchases on the card, and the cash advance rate is what you’re charged when you withdraw cash at an ATM using the credit card. Credit cards can also offer special interest rates such as introductory 0% rates or balance transfer rates.
Bank interest rates determine how long it takes you to pay off debt and build up savings.
When bank interest rates increase, the interest charged on new loans and mortgages is higher and it may take longer to pay off your current debts. That means people generally spend less money and the economy slows down. A perk, however, is that you may get higher savings rates and return on certain investments.
Alternatively, when bank interest rates decrease, banks offer lower rates on loans and mortgages, which means you’ll pay off certain types of debt faster. When that happens, people typically spend more money and the economy grows. The downside of lower interest rates is that you may receive lower rates of return on your savings.
How should I compare bank interest rates in Canada?
Keep the following in mind when searching for the best interest rates in Canada:
Shop around. Don’t just settle for the savings account offered by your regular bank. Shop around to compare a range of HISAs from traditional as well as challenger banks — you might be surprised by just how much more you could be saving
The actual rate. Look at how competitive the interest rate is when comparing. The higher the savings account interest rate you get, the quicker you’ll be able to grow your bank balance.
Fees. Check for any fees that the account or loan has, including upfront and ongoing fees. If you find an option with a competitive interest rate but high fees, calculate whether it’s still the best option.
What affects the interest rate I get on a loan or credit card?
There are also several factors that can affect the rate you get when you take out a loan or credit product. These include:
Your credit score. Lenders will assess your credit history and credit score to determine if you’re a reliable borrower. Taking steps to improve your credit score can help you qualify for a lower rate.
Your income. Lenders often have minimum monthly income requirements that you must meet to show you can make on-time loan repayments. A larger income can help you qualify for a lower rate.
Your employment. If you’ve held down a full-time job for six months or more, you can demonstrate to lenders that you earn a steady income.
Your existing debts. Lenders will consider your debt-to-income ratio when assessing your ability to make loan payments.
NSF transactions. Zero NSF transactions on your bank account will help you qualify for a loan and access a lower rate.
While comparing interest rates across products is a good idea, make sure the products you’re comparing are similar. For example, if you compare a rewards credit card to a low-rate credit card with no added perks or features, their interest rates will be quite different.
Compare high interest savings account interest rates in Canada
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What are negative interest rates?
One financial policy idea that emerged from the Global Financial Crisis, and again made waves at the height of the pandemic, is implementing negative interest rates. A negative interest rate is an interest rate of less than zero, and the idea behind negative rates is to stimulate a stagnant economy.
Negative interest rates are incentives for banks, encouraging them to lend out their reserves rather than deposit them with central banks and be charged interest. The theory is that this will in turn encourage consumers to borrow more money.
Switzerland was one of the first countries to implement NIRP in the 1970s in an attempt to deter a flood of foreign investment. Following the 2008 recession, Sweden was the first country to begin implementing a negative interest rate, while the European Central Bank (ECB) adopted such a policy in 2014.
A negative interest rate could be a way to stimulate the economy, but so far it isn’t something we’ve tried out in Canada. Economists are divided over whether or not it would be a good idea — it would encourage spending and inject cash into the market, but it would also make it more difficult for people to save.
Looking for more information about interest rates? Check out these helpful articles below:
Bank interest rates have a big impact on how much you can save with a savings account and how much your monthly mortgage payment will cost. Compare savings accounts to find the best interest rates in Canada, and make sure you understand how interest rates work before deciding which account or loan is right for you.
Bank interest rates in Canada FAQs
Do your research and find out if the bank is insured by the Canada Deposit Insurance Corporation (CDIC). Deposits of up to $100,000 at a CDIC-insured bank are backed by the Canadian government, which means your savings are safe in the event that your bank fails.
If you need access to your money for emergencies, a high interest online savings account is your best option. However, if you can set your money aside for a fixed term, consider a Guaranteed Investment Certificate to get the best interest rate.
Your bank or lender, neither of whom are legally obligated to follow Canada's prime interest rate. However, banks and lenders very often base their own rates on the policy interest rate set by the Bank of Canada.
The Bank of Canada sets the policy interest rate, which is the rate at which the Bank of Canada would like financial institutions to use for overnight loans to/from each other. The interest rates you get tend to be loosely connected to this — while your personal bank or lender sets their own interest rate, national interest rate averages tend to fluctuate in line with the prime rate.
Among the Big Six Canadian banks, savings interest rates of up to 6.05% are available from the Scotiabank MomentumPLUS Savings Account and up to 5.75% with the CIBC eAdvantage Savings Account. However, these rates are only available for a limited introductory period. Among other providers, the Simplii High Interest Savings Account comes with a promotional rate of up to 5.9%.
Locking in a fixed interest rate can protect you against any potential future rate hikes. However, following multiple rate rises throughout 2022 and 2023, interest rates are the highest they've been for many years. Some analysts predict, however, that rate cuts could be on the cards in 2024. That said, the Bank of Canada decided to hold rates for its first few rate announcements in 2024.
If rates do fall, you may be able to lock in a lower mortgage rate at some stage in 2024. Ultimately, it's up to you to decide which direction you think interest rates are headed and choose the right type of mortgage rate for your needs.
There are several factors that influence the loan interest rate you will get, including your credit score, repayment history, income and employment, and any existing debts. It's easy to compare interest rates between lenders, but keep in mind that your personal financial situation will determine the rate you can qualify for.
Most chequing accounts don't pay any interest. However, there are some hybrid accounts that offer the features of a chequing account but that also pay interest like a savings account. Examples include the EQ Bank Personal Account and the Wealthsimple Spend & Save Account.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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