If you have or thinking of getting a mortgage, or a loan you may have heard the term prime. If you are in the industry you have probably heard of the “overnight lending rate.”

Lines of credit, Home equity lines of credit, and variable mortgages are all considered fluctuating rates. These rates go up or down based on the prime rate.

Prime is a rate that financial institutions lend at. Depending on the product that you are getting ie. mortgage or loan, the rate offered would be at prime – (a discount), or prime + a premium. Prime comes from the overnight lending rate which is a rate that the financial institutions use to lend and borrow money from each other.

To keep their profit margin desirable, the banks, or financial institution adjust their prime as the overnight lending rate changes. The overnight lending rate is confirmed by Bank of Canada 8 times a year in their scheduled meetings.

Join me on this chat with Ian Power of Pulse FM taking about some factors that can influence a hike in the overnight lending rate. Although the most recent decision kept the rates as is, speculations indicate further increases this year.