The market convention for "prime" rates is generally the central bank's rate plus a spread, as "prime" rates are really just a marketing tool and merely a starting point for setting interest rates on consumer lending products. In the U.S. the convention is the Federal Reserve's Discount Window rate plus 300 basis points (i.e., 3%), and in Canada, the convention appears to be the top of the BoC's Bank Rate plus 195 basis points (i.e., 1.95%). Again, the "prime" rate is really just a marketing rate and a starting point for setting consumer lending rates (for instance, the rate you actually pay is based heavily on your individual credit score/profile, among other things), so don't read too much into it.
As for TD, it could be that they are trying to take advantage of brand equity and they realized that the price-elasticity of demand (i.e., how sensitive people are to changing prices) for their loan products was such that they could charge a premium relative to the other major Canadian banks because of their perceived premium market position (again, another marketing trick). Moving it much higher would, as you point out, result in reduced lending volumes/new customers, but basically, they figured out how much they could raise the temperature in the proverbial pot of water before the frog would jump out (it could also be a cost of funding issue, too, but that's a much longer explanation). In any case as you noted, that's just a "prime" mortgage rate, and their regular "prime" rate is in lockstep with the other big banks (https://wowa.ca/banks/prime-rates-canada).
I'd also point out that the Bank of Canada is aware that some banks may not all move in lockstep on their prime rates, as there is some interesting language in the statistical methodology in how the BoC determines what to publish as the "prime" rate (https://www.bankofcanada.ca/rates/banking-and-financial-statistics/posted-interest-rates-offered-by-chartered-banks/).
tl;dr: don't read too much into "prime" rates; they're mainly just for marketing.