Elevated Interest Rates Drive Meaningful Yield Increases on Long-Term GICs
The Bank of Canada may be on hold but parts of Canada’s deposit market are still moving.
In May, the clearest changes are not in everyday savings accounts, where the best offers remain promotional and temporary, but in longer-term GICs. Compared to April, the best one-year GIC rates have sunk lower while the best three-year GIC and five-year GIC rates have moved higher.
At the short end, the best one-year GIC rate has slipped to 3.60 per cent from 3.65 per cent last month, with Achieva Financial now leading that category instead of WealthONE. The best two-year rate is unchanged at 3.80 per cent, still offered by Achieva Financial.
Further out, however, rates have moved higher. The best three-year GIC has risen to 3.91 per cent from 3.80 per cent, with Equitable now in first place instead of Saven Financial, while the best five-year GIC has climbed to 4.05 per cent from the previous 4 per cent tie, with WealthONE now alone at the top.
Savings accounts tell a steadier story. Bank of Montreal now leads the promotional market at 4.65 per cent for the first four months, up from the 4.60 per cent offers by Royal Bank of Canada and Canadian Imperial Bank of Commerce that led in April. Once the promotional period ends, rates will fall sharply.
Standard savings rates, by contrast, are unchanged, with Saven Financial still at 2.85 per cent and Oaken Financial at 2.80 per cent.
Fintechs are part of this market too, though often with extra conditions. Neo advertises up to 3.0 per cent on its savings account, but you need a balance of at least $20,000 to get that rate. Meanwhile, KOHO advertises up to 3.5 per cent through its paid subscription plan.
Comparing with current mortgage rates also remains useful. The best three-year fixed mortgage rate is at 3.89 per cent, and the best five-year fixed mortgage rate at 3.94 per cent.
That means the best three-year GIC rate is now two basis points higher than the best three-year fixed mortgage rate, while the best five-year GIC is 11 basis points higher than the best five-year fixed mortgage rate. A saver can earn a higher return on a five-year guaranteed deposit than some homeowners pay to borrow.
For savers, the takeaway is fairly simple. The market is not suddenly becoming more generous across the board, but it is becoming a little more rewarding for people who are willing to lock in for three or five years.
Interest rates are provided by WOWA.ca, which gathers, aggregates and freely disseminates data on mortgage rates, savings accounts and GIC rates from 50+ Canadian financial institutions.
Jimmy Nguyen is a financial writer and analyst at WOWA.ca, a Canadian personal finance platform.
This article was first reported by The Globe and Mail
