Get used to it, savers and conservative investors. Every Bank of Canada rate cut will result in bad news from the banks and investment companies you deal with.
One quick example: after the central bank cut its overnight rate Wednesday by one-quarter of a percentage point, EQ Bank sent an e-mail to clients saying the base rate on its savings account would fall to 2.25 per cent from 2.5 per cent, effective Friday.
Another example: Royal Bank of Canada cut the return on its investment savings account this week to 3.8 per cent from 4.05 per cent, and other banks and investment companies can be expected to make identical cuts of 0.25 of a point in their ISA products.
Rates are falling fast, but there are still a few pockets where you can find comparatively strong returns. Here are four of them:
- The EQ 10- and 30-day notice accounts: EQ offers 4 per cent interest, down from 4.5 per cent, if you’re willing to give 10 days notice before making a withdrawal; you can get 4.25 per cent interest if you provide 30 days notice, down from 5 per cent. For now, EQ also continues to pay 4 per cent on its savings account to people who have recurring direct deposits of at least $2,000 per month.
- The Motive Savvy Savings Account and NEO Financial: As of Friday, you could still get 4.1 per cent interest from Motive and 4 per cent from NEO; a lot of daylight is opening between the rates these two alternative banks offer and competitors.
- A Tangerine one-year guaranteed investment certificate: This online bank had a very competitive one-year rate of 4.6 per cent as of Friday; slightly more was available elsewhere, but Tangerine is a familiar name to many people.
- T-bill and money market exchange-traded funds: Expect their yields to be around 4.25 per cent after adjusting to the latest Bank of Canada rate cut; these funds are a candidate to hold cash in your investment account along with ISAs, which are basically savings account products for investors.
As a saver or conservative investor, you should know what you’re up against with future rate cuts. In 2024, the Bank of Canada has the opportunity to adjust rates on Oct. 23 and Dec. 11. Four more dates have been set for the first half of 2025. It’s unclear whether the bank will lower rates at each opportunity, but the state of the economy and falling inflation point to more cuts ahead.