At 4.45%, the Canadian Prime Rate Just Made Your Line of Credit More Expensive Than You Think

A variable-rate line of credit that charged you $375 in interest last month now costs $445 monthly on the same $100,000 balance. That's the math when the Canadian prime rate sits at approximately 4.45% as of August 2026, according to WOWA.ca, and most borrowers are still budgeting as if rates were somewhere near pandemic lows.

The rate increase compounds faster than you think

Prime affects every product tied to it on the same day the banks move. Your home equity line of credit (HELOC), unsecured personal line of credit, and some business credit facilities all reset within 24 hours of a prime rate change. The adjustment isn't pro-rated. If prime moves mid-month, you're paying the new rate on the outstanding balance immediately.

This creates a different problem than rising fixed-rate debt. A mortgage locks you into a rate for a term. A line of credit reprices constantly, and most people treat it like a standing balance they'll "deal with eventually." At 4.45%, eventually is expensive. A $50,000 HELOC balance costs $185 monthly in interest charges alone. That's $2,220 annually just to keep the debt where it is.

Canadians hold roughly $179.5 billion in outstanding HELOC balances, and almost no one budgets for rate moves on that debt the way they track mortgage renewals. The result is structural leakage, money leaving accounts every month that wasn't leaving six months ago, with no obvious place to cut spending to offset it.

The spread between products has widened into a trap

Prime-based lending used to sit comfortably below fixed mortgage rates, which made lines of credit the cheaper option for short-term liquidity. That relationship has flipped. The current 5-year fixed mortgage rate is 4.04% as of mid-August 2026, per Ratehub.ca. A HELOC priced at prime plus 0.5%, a common retail spread, costs you 4.95%. The variable product is now more expensive than the fixed one, but it still reads as "flexible" and "low-cost" in most people's mental accounting.

Credit cards remain worse, sitting between 19.99% and 23.99% depending on the issuer. But credit card debt tends to trigger alarm. Line of credit debt does not, because it was cheap for so long that the behaviour stuck even as the rate environment changed.

What used to be a reasonable bridging tool, borrow against the house at prime, pay it down over six months, has become a 4.45% rolling loan that many households are now servicing instead of eliminating.

Rate cuts are not coming fast enough to matter

The Bank of Canada has signalled a on hold with two-way risks, but central bank cuts move in quarter-point increments over months. Even if prime drops 50 basis points by year-end, a $75,000 line of credit balance still costs you $2,963 in annual interest at 3.95%. You're not cutting your way out of that with skipped lattes.

The tactical move is to convert variable-rate credit to fixed-rate debt where the balance is large and the payoff timeline is longer than 18 months. That means refinancing the HELOC into the mortgage at renewal if you can still qualify, or consolidating it into a fixed-term loan. Both options lock the rate and force amortization, which a line of credit does not.

If refinancing isn't available, paying down the highest-rate variable debt becomes the priority, not because it feels urgent, but because the monthly cost is compounding while you wait for conditions to improve. At 4.45%, the line of credit is no longer the cheapest dollar in your capital structure. Treating it like it is costs you real money every month.