In an era of cooling interest rates, Canadians will soon find it harder to save. With the Bank of Canada’s latest cut to its benchmark rate, here’s where savers can secure the best risk-free returns.
Currently, the top five-year GIC available nationwide is from MCAN Financial and offers 3.95 per cent, while the best no-strings savings account rate offers 2.85 per cent, from Wealth One Bank of Canada.
Savings accounts are best suited to short-term or emergency funds, offering flexibility at the cost of lower returns. GICs, by contrast, reward patience with higher guaranteed rates.
GICs are also currently outperforming Government of Canada bonds, which yield around 2.34 per cent (one-year) and 2.68 per cent (five-year). Bonds, however, can be sold at any time if the holder needs to access their money.
On Oct. 29, the central bank cut its policy rate by 25 basis points to 2.25 per cent, marking a second consecutive month of cuts as it seeks to support the economy amid ongoing trade uncertainty. The bank also signalled that it plans to hold rates steady in the near term as it guides inflation back toward its 2-per-cent target.
Lower policy rates reduce funding costs for banks, prompting them to trim savings and GIC rates. As institutions adjust to recent cuts, consumers may see returns fade in the months ahead.
For those able to lock in their funds, now may be an opportune time to secure current rates before the easing cycle runs its course.
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Ali Nassimi, PhD, is a writer and content developer at WOWA.ca, a Canadian personal finance platform.
