Average Prime Rate Spread by Decade

Yesterday I showed the historical difference between the Prime Rate and the Bank of Canada rate going back to 1935… that chart is quite impressive and clearly shows the low interest rate era we are living in. To draw some conclusions from that chart, I created the same chart but averaged the rate difference by decades and the numbers are quite interesting…

The Prime Rate in the current decade is 0.25% higher than the past 4 decades! What does this mean to you? Simple, higher interest costs if you have a variable rate mortgage or loan or line or credit.

Decade Average Rate Spread (%) 1930s 2.62 1940s 2.87 1950s 2.16 1960s 1.23 1970s 1.16 1980s 1.21 1990s 1.24 Current 1.55

Source: Bank of Canada

Historical Relationship – Bank of Canada Bank Rate vs Prime Rate

Yesterday I posted a 10-year chart showing the difference between the Bank Rate which is set by Bank of Canada and the Prime Rate which is set by the chartered banks and is the rate the banks will lend to their most creditworthy customers.

Today I bring to you the same chart but going back since 1935… that’s right, the relationship between Bank Rate & Prime rate since 1935!

The spread is clearly at historic lows compared to the earlier half of 20th century but relatively high compared to the latter half

Source: Bank of Canada