Canadian savers now have access to 4-per-cent GICs once again. The highest five-year GIC rate has risen to 4.50 per cent, while the best three-year rate stands at 4.40 per cent, and the best one-year rate is 4.00 per cent. Savings accounts are also becoming more competitive, with WealthOne offering Canada’s top standard savings account rate at 3.00 per cent, and Manulife providing the same rate on new deposits for two years.
Normally, a rising five-year GIC rate would make the decision to lock in straightforward. However, the Bank of Canada’s policy rate is currently at 2.25 per cent, with forecasts suggesting it will climb to 2.50 per cent by early 2027, 3.25 per cent by mid-year, and 3.50 per cent by the end of 2027, eventually reaching 3.75 per cent in 2028. This creates a dilemma for savers: locking in a long-term GIC protects against falling rates but prevents benefiting from potential rate increases.
Waiting for higher rates remains a gamble. A higher Bank of Canada rate does not guarantee that five-year GICs will rise by the same amount. Shorter-term rates are more directly influenced by the overnight rate, while longer-term GICs depend on future policy rate expectations and Government of Canada bond yields. Since late July, the best one- and two-year GIC rates have increased by 35 basis points, the three-year rate by 50 basis points, and the five-year rate by 40 basis points.
Savers now face lock-in risk: purchasing a five-year GIC today could mean being stuck at a lower rate if rates continue to rise. One strategy to mitigate this risk is to spread savings across multiple GIC maturities. If rates rise as expected, shorter-term GICs can be reinvested at higher rates. If rates fall, the longer-term portions will have secured today’s relatively high rates. Additionally, for funds needed soon, high-interest savings accounts offer more liquidity than squeezing out extra basis points with a GIC. The best standard savings rate is currently 3.00 per cent from WealthOne, with promotional rates reaching 5.00 per cent, though these offers are often short-lived.