Where our rates come from
Any tool that tells you what you could save is only as good as the rate it assumes. So here is ours, with the working shown.
Two different things
Variable rates really do follow the Bank of Canada. Prime sits a fixed step above the overnight policy rate — 2.20 percentage points, unchanged for years — and a variable mortgage is prime less whatever discount a lender will give you.
Fixed rates do not work that way, and this is where a lot of commentary goes wrong. They are priced off Government of Canada bond yields at a matching term, because that is what lenders fund with. The five-year yield reflects where markets think rates are going, which is why fixed rates sometimes move before the Bank does, and occasionally in the opposite direction.
So we use two formulas, not one:
fixed (term) = Government of Canada bond yield at that term + lender spread variable = prime rate - lender discount
Today’s numbers
Published by the Bank of Canada, 2026-08-31. We read them directly from its public Valet service.
Policy rate
2.25%
Target for the overnight rate
Prime rate
4.45%
2.20 points above the policy rate
| Term | Bond yield | Lender spread | Our estimate | Source |
|---|---|---|---|---|
| 1 year | 3.01% | + 1.35 | 4.36% | our estimate |
| 2 year | 3.01% | + 1.35 | 4.36% | our estimate |
| 3 year | 3.10% | + 1.35 | 4.45% | our estimate |
| 4 year | 3.21% | + 1.35 | 4.56% | our estimate |
| 5 year | 3.33% | + 1.35 | 4.68% | our estimate |
| Variable | prime 4.45% | − 0.85 | 3.60% | our estimate |
The honest part: the spread is a judgment
The bond yields above are facts, published daily, and we do not touch them. The lender spread is not a fact. It is a number we set by comparing against real quoted rates, and it moves — spreads widened sharply in 2008, 2020 and 2022, when fixed rates came adrift from bonds for months at a time.
So the spread carries an age. If nobody has checked it against a real quote in 45 days, we stop sending rate alerts entirely — even though the bond yields underneath are perfectly current. A stale spread is the more dangerous of the two, because the rate it produces still looks fresh.
What this is not
These are not offers, and they are not quotes. We are not a lender or a brokerage, and we cannot hold a rate for you. What you are actually offered depends on your circumstances, your property, your credit, whether the mortgage is insured, and which lender you approach.
The calculator does not use these numbers unless you let it — you type your own rate, and yours should win. These are what we fall back on when re-checking a saved scenario for a rate alert, and every alert says so.