Jun 12, 2026
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For years, Canadians parked savings in guaranteed investment certificates (GICs) and watched the rate environment do the heavy lifting. In 2022 and 2023, this strategy made sense as rates climbed fast. By late 2023, a 1-year GIC at a competitive online bank could earn close to 6%. Those days are gone.
With the Bank of Canada holding its policy rate at 2.25% in June — a level it has maintained since early 2026 — GIC rates have followed the overnight rate down. That wouldn’t be a big deal, except headline inflation rose to 2.8% in April — and anyone who does the math can quickly see that the real return on a typical 1-year GIC is starting to look very thin.
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Add in the uncertainty — with Bank of Canada Governor Tiff Macklem addressing the global pressure that’s pulling monetary policy in both directions — and any Canadian about to renew fixed income investments is left in an uncomfortable position.
For Canadians with a GIC nearing maturity, the question is no longer simply which institution offers the highest rate.
The bigger question is whether to lock in now or wait.
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Why the decision is becoming more difficult
Under normal circumstances, investors can make educated guesses about the direction of interest rates.
Today’s environment is anything but normal.
Inflation remains above the Bank of Canada’s 2% target, suggesting policymakers may need to keep rates elevated for longer. At the same time, slowing economic growth, weak consumer spending and uncertainty surrounding global trade create pressure for lower rates.
That leaves the Bank of Canada balancing competing risks.
If inflation proves stubborn, rates could remain unchanged for longer than expected — or even rise.
If economic conditions deteriorate, the Bank could eventually resume cutting rates.
For GIC investors, either outcome creates risk.
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Lock into a long-term GIC today and you could miss out on higher rates later. Stay in cash waiting for rates to rise and you may discover rates move lower instead.
Don’t let inflation eat your savings. Browse the best high-interest accounts for 2026 and open an account in minutes to start earning interest daily. Earn 2% or more an every dollar you save. To get started, open a no-fee high-interest savings account with EQ Bank.
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Consider building a GIC ladder
One of the most effective ways to manage uncertainty is through a GIC ladder.
Instead of investing all your money into a single term, you divide your funds among several maturity dates.
For example:
- 20% into a 1-year GIC
- 20% into a 2-year GIC
- 20% into a 3-year GIC
- 20% into a 4-year GIC
- 20% into a 5-year GIC
Each year, one GIC matures and can be reinvested at prevailing rates.
This strategy reduces the risk of locking all your money into the wrong term at the wrong time while maintaining access to a portion of your funds annually.
Keep some money liquid
Many investors automatically move maturing GIC proceeds into another GIC.
That may not be the best approach right now.
Maintaining a portion of savings in a high-interest savings account allows investors to remain flexible if rates change or opportunities emerge elsewhere.
Liquidity can also be valuable if inflation remains elevated and household budgets come under pressure.
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Financial planners often recommend keeping emergency savings separate from longer-term fixed-income investments, regardless of the interest-rate environment.
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Don’t focus solely on the headline rate
The highest advertised GIC rate isn’t always the best choice.
Before renewing, consider:
- Whether the GIC is redeemable or non-redeemable
- The financial institution’s deposit insurance coverage
- The term length
- Whether the investment is held in a registered account
- The after-tax return
For non-registered accounts, taxes can significantly reduce the net return earned from interest income.
A 3.5% GIC may look attractive until taxes and inflation are factored in.
Consider your time horizon
The best GIC strategy often depends less on where rates are headed and more on when you’ll need the money.
If the funds will be required within one or two years, preserving capital and maintaining liquidity may be more important than maximizing yield.
Investors with longer time horizons may be willing to lock in a portion of their money for several years if rates remain attractive relative to their alternatives.
The key is matching the term of the investment with the expected use of the funds.
What to do before your next GIC renewal
None of this means GICs are a bad choice — they remain one of the safest fixed-income options available to Canadians, with principal guaranteed and deposit insurance protection in place. But right now, the terms and where you shop matter considerably.
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Three questions are worth asking before your next renewal.
#1: What is the after-inflation, after-tax return on the rate being offered? If it is below 1% net, compare alternatives.
#2: Are you using a registered account? A TFSA or RRSP eliminates the tax drag and makes the nominal return your actual return.
#3: Are you comparing online institution rates alongside your existing bank? The rate gap between online lenders and the Big 5 has consistently been 0.5% to 1% — on larger deposits, that is a meaningful dollar difference over a 1- to 3-year term.
Your money deserves more than a “Big Six” default. Browse our expert rankings on the top bank accounts and see how much you could save by switching banks.
Given where the Bank of Canada’s policy rate sits and the range of outcomes the Bank itself acknowledges, the current environment rewards flexibility and comparison shopping more than it rewards conviction about where rates are headed.
Bottom line
Predicting the Bank of Canada’s next move is difficult even for professional economists.
Rather than trying to guess where rates will be six or 12 months from now, many investors may be better served by focusing on flexibility.
Building a GIC ladder, keeping some cash accessible and matching investment terms to future spending needs can help reduce the risk of making a costly rate bet.
Because in today’s market, the biggest risk may not be choosing the wrong GIC.
It may be assuming anyone knows exactly where interest rates are headed next.
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Romana King, Senior Editor at Money.ca, also writes for various North American publications and the RKHomeowner blog. Her book, House Poor No More, is an Amazon bestseller and five-time award winner, including the 2022 New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award.
