At a Glance: Preparing For a 6% Prime Rate

July 14, 2022

2 min

Spend less time in spreadsheets, and more time in your business.

See how modern cloud based FP&A software can save you time and money.

learn more

At a Glance: Preparing For a 6% Prime Rate

The prime corporate borrowing rate has averaged around 3.00% for the past 10 years. As the Bank of Canada aggressively tries to taper inflation, rates look to effectively double by year end from the past pre-covid era. Firms must budget for increased interest costs and adapt.

Where are we now?

The prime lending rate at 4.70% is now the highest it’s been over the past 10 years
The last time prime was above this level was April 2008
Since 2004, prime was above 4.75% for a period which lasted 30 months (Oct 2005 to April 2008

Where do we go from here?

The swaps market is pointing to an additional 1.25% in rate increases by year end
The Bank of Canada is expected to keep rates on hold first quarter of 2023

SOURCES

https://www.bloomberg.com/news/articles/2022-07-13/bank-of-canada-hikes- 100-basis-points-in-bid-to-crush-inflation#xj4y7vzkg?sref=cxtFVrVh

https://www.icicibank.ca/en/personalbanking/ratehistory_popup_interestrates

https://www.bankofcanada.ca/2022/07/opening-statement-2022-07-13/

DISCLAIMER

The opinions expressed are those of Henon Financial Technologies Inc. (“Henon”). The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Henon does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Henon disclaims any responsibility to update such information. Neither Henon or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.

All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients should seek professional advice for their unique situation. Neither Henon nor any of its affiliates or representatives is providing tax, investment, or legal advice. Past performance does not guarantee future results. This material was prepared solely for informational purposes, does not constitute an offer or an invitation by or on behalf of Henon to any person to buy or sell any security and is no indication of trading intent in any fund or account managed by Henon. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Unless otherwise specified, all data is sourced from Henon.

The Stylized Henon Design, and Henon Logo are trademarks of Henon Financial Technologies Inc.