It looks like we reached Peak GIC in early December.
Rates on guaranteed investment certificates were at a point then where it was possible to find 5-per-cent returns for terms of one through five years from alternative banks and even some of the big banks. But this week, there was a noticeable retreat on GIC rates. A 5-per-cent return is still there for the taking, but it’s clear that GIC issuers are starting to pull back from that threshold.
While the Bank of Canada did raise its overnight rate last week by 0.5 of a percentage point, there is a growing sense that we are nearing the end of the current cycle of rising interest rates. In the bond market, which has the biggest influence on GIC rates, there has been a sharp decline in rates since November.
GIC returns have held up well in this context, but there have been signs lately that 5-per-cent returns will be harder to come by than they were a couple of weeks ago. A quick check of the GIC inventories at a couple of big online brokers turned up nothing at 5 per cent or more for terms of three, four and five years. Both had one- and two-year GICs paying a tick above 5 per cent.
As of late this week, the GIC listings on HighInterestSavings.ca showed 14 online banks with five-year GIC rates at 5 per cent or more, down from 16 a week or so before. Returns of 5 per cent are more scarce for other terms. For example, eight issuers had a rate of 5 per cent or better for one year, and 10 were at or above that mark for two years.
There was one remaining 5-per-cent GIC offer from big banks as of late in the week: Bank of Nova Scotia featured a three-year term at 5 per cent; Royal Bank of Canada has a special rate of 4.85 per cent for five years.
Try a deposit broker if you’re frustrated with finding top GIC rates on your own. HighInterestSavings.ca lists three different GIC brokers (scroll down the GIC page), each with rates in the area of 5.55 per cent for various terms. As with all GIC issuers, keep an eye out for minimum required investments to qualify for the top rate. These minimums can be as high as $25,000 to $100,000.
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