Rob Carrick: The 5-per-cent GIC is fading into the sunset – with one exception
Read the article re-posted below as it appeared in the Globe & Mail.
Published April 6, 2023 Updated April 7, 2023
Rob Carrick Personal Finance Columnist
Posted with permission from The Globe and Mail
We hit a sad milestone in GIC investing in early April – 5-per-cent returns were no longer widely available on terms of two through five years from alternative banks.
There’s no particular significance to a return of 5 per cent – it’s just a nice, round number that corresponds to the lower range of what you might expect from stocks on an average annual basis. Adjusted for their near-zero risk profile, GICs at 5 per cent look pretty good to many investors right now.
My go-to website for monitoring GIC rates is HighInterestSavings.ca, where there were two banks offering two-year guaranteed investment certificates at 5 per cent or slightly more and six banks between 5 and 5.25 per cent. Steadily over the past few months, the number of 5-per-cent options has declined.
For now, there’s one last refuge for 5-per-cent returns across all terms. Deposit brokers tracked by HighInterestSavings.ca offered returns of as much as 5.35 per cent for one year at the end of the first week of April, 5.4 per cent for two years, 5.3 per cent for three years and 5.25 per cent for four and five years. For more brokers, try the search engine offered by the Registered Deposit Brokers Association at rdba.ca/find-a-broker, or a google search.
A few things to watch out for if you want to pursue those higher rates from deposit brokers:
Rate availability: Rate specials come and go quickly, so what’s available today may not last; that said, brokers work with many GIC issuers and may have alternatives to offer.
Deposit insurance: Brokers do business with banks that are members of Canada Deposit Insurance Corp., and with credit unions that are covered by provincial deposit insurance plans; insurance company GICs are covered by Assuris, an organization that protects holders of insurance products against the failure of an insurer.
Minimum investment: To qualify for top rates, you may have to invest a minimum that could range from $25,000 to $100,000.
Your province: Some GIC issuers may not be available to Quebec residents.
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Greetings, financial aficionados! Allow me to dive into the intricacies of the recent article about the dwindling availability of 5-percent Guaranteed Investment Certificates (GICs). I'm well-versed in the realm of financial instruments, particularly when it comes to deposit brokers, GIC rates, and the regulatory landscape in Canada.
Now, let's dissect the key concepts from the article:
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GIC Investing Milestone: The article highlights a noteworthy moment in GIC investing—a decline in the widespread availability of 5-percent returns for terms ranging from two to five years. This serves as a benchmark in the financial landscape, signaling a shift in investment dynamics.
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Risk-Adjusted Appeal: The author discusses the attractiveness of GICs at 5 percent, emphasizing their near-zero risk profile. This suggests that, despite not being a groundbreaking return percentage, the stability and security of GICs make them appealing to investors in the current market.
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Monitoring GIC Rates: The author mentions HighInterestSavings.ca as a go-to website for monitoring GIC rates. This implies that this platform is a reliable source for staying updated on the latest trends and offerings in the GIC market.
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Declining Options: Over the past few months, the number of 5-percent GIC options has dwindled. This observation underscores the dynamic nature of the financial market and the constant flux in available investment opportunities.
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Deposit Brokers' Last Refuge: Despite the decline, there remains a last refuge for 5-percent returns across all terms—deposit brokers tracked by HighInterestSavings.ca. These brokers offer varying rates for different durations, providing an alternative for investors seeking higher returns.
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Watch Out for Rate Availability: The article advises caution regarding rate specials from deposit brokers, emphasizing their transient nature. Investors need to act promptly as these rates may not last, but brokers might have alternative options.
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Deposit Insurance: It's crucial to note that deposit brokers do business with banks covered by the Canada Deposit Insurance Corp. and credit unions covered by provincial deposit insurance plans. The article also mentions Assuris, an organization protecting holders of insurance products, covering insurance company GICs.
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Minimum Investment Requirements: To qualify for top rates from deposit brokers, investors may need to meet minimum investment requirements ranging from $25,000 to $100,000. This criterion ensures that higher returns are accessible to committed investors.
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Regional Considerations: The author points out that certain GIC issuers may not be available to Quebec residents, highlighting the regional nuances in the financial landscape.
In conclusion, this article is a poignant exploration of the evolving GIC market, offering insights into the challenges and opportunities faced by investors in the quest for favorable returns. If you're navigating the financial terrain, it's essential to stay vigilant, act promptly, and consider the various factors influencing your investment choices. Happy investing!
