A Beginner Guide to Understanding the TD Prime Rate

When you’re applying for a loan or purchasing a financial product, an important factor to consider is your bank’s prime rate. 

Those who are looking to make a big financial investment, such as purchasing a car or a new home, should be aware of how much interest they’ll be charged before going ahead with their plans to ensure that they can afford the current going rate.

If you’re a TD Bank customer and are in a similar situation as detailed above, you may wonder: what is the TD prime rate, and how will it affect my pending financial investment? Or perhaps you’re interested in how their rates stack up against other banks like HSBC.

Keep reading below to learn more about prime rates, how they affect consumers, and what TD’s prime rate is for 2023, along with other related facts!

Understanding the TD prime rate: a beginner’s guide

If you’re unaware of what prime rates are and how they work, it’s important to familiarize yourself with these details before making any major financial decisions that involve the prime rate. Below, we’ll discuss what a prime rate is and how financial institutions determine it.

What does prime rate mean, and how is it set?

The prime rate is the amount of interest consumers are charged when they are worthy of credit. Generally, this rate is used as a baseline when your banker decides how much they’re going to charge you for a floating-rate loan. 

Common situations where the prime rate will be charged to customers include applying for a credit card, car and personal loans, or a mortgage. This rate is charged alongside the interest rate that individual banks will set for various financial products. 

Banks determine their prime rate by following the BoC (Bank of Canada) policy interest rate (or the overnight rate) as a guideline. This rate is published regularly, usually weekly, for all commercial Canadian banks to refer to when setting their own rate.

When the Bank of Canada raises the prime rate, all commercial banks face increased charges in order to borrow more money. Therefore, banks will raise their prime rate higher to make up the difference. 

What is the TD Bank prime rate for 2023?

So, what is the TD prime rate? At this time, The TD Bank prime rate sits at 6.85%. This is slightly higher than the Bank of Canada prime rate, which currently sits at 6.70%. This rate will fluctuate over time but will not affect fixed-rate loans and mortgages. 

Therefore, current homeowners can rest assured that they won’t have to face any rate increase on their mortgage payments until the next scheduled increase, regardless of how the prime rate changes. 

How the TD prime rate affects customers

For TD Bank customers who currently make payments on fixed-rate loans and mortgages, their interest rate will not fluctuate until it’s time for them to re-negotiate their terms. 

However, those currently looking to purchase a home and mortgage and those taking out new loans will face higher rates once TD’s prime rate goes up. 

For example, if you were provided with a mortgage prime rate quote from a TD broker, it’s possible that the rate will go up before you actually sign your mortgage loan papers, causing you to pay more than you initially thought. 

This is dependent on the BoC’s weekly changes, so if you’re still negotiating your mortgage or loan, you may want to keep an eye on how the Canadian prime rate fluctuates over the coming weeks or months. This will give you a better idea of what to expect from a potential rate increase.

Other related FAQs 

Now that you’re aware of what the prime rate is at TD Bank, along with how it affects you, there are likely a few more questions you have related to this subject. For more information regarding the TD prime rate, keep reading below:

Is prime rate and interest rate the same thing?

The prime rate is a type of interest that banks charge as the baseline for loans and mortgages, with interest rate added as an additional charge. 

Therefore, as TD Bank raises its prime rate, the regular interest that you will pay on your loan or mortgage will also increase. 

How often does the TD prime rate change?

The TD Prime rate changes as the BoC (Bank of Canada) prime rate increases. While the BoC provides weekly updates on the current prime rate, the actual number only changes about eight times per year. 

In 2023, the scheduled changes for the Canadian prime rate are January 25, March 08, April 12, June 17, July 12, September 06, October 25, and December 06.

However, the overnight rate may occasionally change from one day to the next, depending on certain changes in the nation’s economic state. In this case, the announcement schedule for the new prime rate may change. 

Can you negotiate the TD prime rate for a mortgage or loan?

According to TD Bank’s website, those looking to apply for a mortgage may be able to negotiate a better interest rate depending on their current financial circumstances. However, the mortgage prime rate cannot be negotiated, as the prime rate can only be lowered when altered by the Bank of Canada. 

The amount of interest you can negotiate will depend on the broker you’re working with at TD, but in general, banks will only go as low as 0.5%, as they will usually charge around 2% on top of the prime mortgage rate. 

In order to get a full scope of your options in regard to obtaining a lower mortgage rate, you can contact a TD Bank mortgage advisor through the company website. 

Does TD match its mortgage rates with Canada’s prime rate?

As touched on above, TD alters its mortgage prime rate whenever the Bank of Canada updates the nation’s prime rate. However, TD’s prime mortgage rate is slightly higher than the nation’s prime rate, currently sitting at 6.85%, while the common prime rate is 6.70%.

TD’s mortgage prime rate has been higher than the other major banks in Canada since 2016, increasing it by upwards of 0.15%. 

While the other Big Five banks decided not to follow this increase, TD continues to add an extra 0.15% as the BoC raises or lowers the nation’s prime rate.

Conclusion: what is the TD prime rate?

Currently, the TD Bank mortgage prime rate sits at 6.85%. This rate holds a 0.15% increase above the nation’s prime rate, which currently sits at 6.70%. TD’s prime rate is charged alongside regular interest rates when customers take out loans or mortgages and apply for credit cards. 

Fortunately, homeowners already attached to a fixed loan won’t have to worry about being charged extra as the prime rate fluctuates, as the rate of interest they pay is based on what the prime rate was when they signed their mortgage papers. 

However, those purchasing new financial products will have to pay the current prime rate, even if they were initially quoted a lower rate of interest. While the prime rate cannot be reduced for new loans or mortgages, TD customers can request a reduced interest rate depending on their current financial circumstances.