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1.00% Bank of Canada increase leads to average 0.61% increase in savings accounts

It’s now been 1 month since the Bank of Canada raised its key interest rate by a whopping (by recent standards) 100 basis points to 2.50%. What has happened to savings account interest rates since then?

The largest absolute increase was at Canadian Tire Bank from 1.45% to 2.40%, but 1.45% had drifted to almost the bottom of our savings account comparison chart. Motive Financial increased its savings account and TFSA interest rate from 2.20% to 3.00%, which makes it the clear leader at the moment.

14 of 19 savings accounts on our chart have seen their interest rates increase since July 13, and by an average of 0.61% or 61 basis points. That’s a large average increase, although far from the full 1.00% increase by the Bank of Canada.

Some promo rates are going up too

With savings account interest rates continuing to increase, what happens if you were locked into a promo rate? In at least a few cases, those rates have continued to increase:

• Simplii Financial’s targeted new deposit promo from July started out as 3.00%, and has since increased to 3.85%, with the same end date of October 31, 2022
• Meridian Credit Union’s new account promo started out at 2.75% (for the first 8 months) in May, but has since gone up to 3.50% or 3.65%, depending on when you created the account
• DUCA Credit Union’s (Ontario-only) Earn More Park Account promo, which started out 1 year ago at 1.50%, has increased and been extended multiple times all the way to 3.25%. Given that its end date has been completely removed, it’s more of a regular rate than a promo at this point!

By contrast, Tangerine Bank’s recent promos for both new and existing customers have fixed promo rates that don’t change if the base interest rate changes (at least so far).

There is a 4.70% savings account promo

Is a 4.70% savings account for real? Mostly. It is linked to the prime rate, but only in Alberta and only until October 10.

So many choices, too little time

As “high interest savings accounts” start to live up to their name again, how do you choose from amongst all the options? Chime in on a recent forum thread that asked which 3 or 4 online banks you would get.

Are GIC rates peaking?

GIC rates were the star in the first half of 2022, increasing by up to 3.00% for 1-year through 5-year rates for the leaders on our GIC comparison chart. While on average we have seen some modest increases (0.05% to 0.30%) over the past month, the pace of increases has definitely slowed down. EQ Bank’s GIC rates have actually started to decrease. For now, EQ Bank appears to be an outlier in that respect, which may be related to a decreased need for funds (and/or a reduced dependency on deposits) on its mortgage side.

Speaking of outliers, Tangerine Bank is currently tied (with Peoples Trust) for the top 1-year GIC rate on our chart at 4.50%. Tangerine’s 1-year rate is weirdly above its 5-year rate of 4.45%. So shop around depending on the term you’re looking for; as an example, MAXA Financial is currently offering the highest 5-year GIC rate on our GIC chart at 5.10%.

Cash back credit card sign-up offers

Looking for a new credit card? Check out our cash back website where you can currently get up to an additional $200 Interac e-Transfer or a $275 Amazon.ca gift card for successfully signing up for a credit card through our site.

GICs have hit 5.00%

Only one month ago, our highest tracked 5-year GIC rate was 4.50%. We’ve now hit 5.00% for a 5-year GIC at both Oaken Financial and the somewhat surprising Canadian Western Bank.

Remember that we keep a history of all GIC rate changes on our chart; take a look at Oaken Financial’s GIC rate history.

1-year GIC rate leaders have shot well past 4.00%, with Motive Financial currently offering a 4.24% 1-year GIC.

The rapid rise in GIC rates have led to an interest (no pun intended) in GICs that we haven’t seen for years. There has also been more discussion around odd-term rates, such as 15-month and 18-month GICs.

The best savings account interest rate is in Ontario

Saven Financial (Ontario only) continued to widen its lead atop our savings account comparison chart by increasing its regular savings account interest rate from 2.40% to 2.85% on July 1. For Ontarians, DUCA Credit Union has an even higher savings account interest rate at 3.10%. DUCA’s offer is technically a promotion, although it currently has no end date.

For those outside of Ontario, Motive Financial still has the highest regular savings account and TFSA interest rate, after increasing its rate from 2.00% to 2.20%.

The next key interest rate announcement from the Bank of Canada is on July 13, and more hikes could be in store.

Good USD rates are hard to find

If you’ve got US dollars in Canadian bank accounts, you know that there are not that many good options and the rates don’t keep up with Canadian dollar accounts. In one of our long-standing forum threads on US dollar deposits, a forum member recently pointed out that Tangerine Bank has a 1-year USD GIC offering 3.50%.

Too early to think about your TFSA in 2023?

Given high inflation, should we expect to see $6,500 in TFSA contribution room in 2023? Some forum members are already speculating well in advance.

It pays to shop around in this volatile rate environment

The Bank of Canada has now raised its key interest rate by 1.25% in 2022, including its most recent 0.50% increase on June 1. Its next scheduled announcement is on July 13.

We’ve been busy tracking all of the resulting savings account and GIC interest rate increases, which have varied greatly between financial institutions.

At the beginning of 2022, Wyth Financial had the top savings account interest rate at 1.55%, and has since increased it by a paltry 0.05% to sit at 1.60%. By contrast, Ontario-only Saven Financial’s savings account interest rate has increased from 1.50% on January 1 to 2.40% today. Current nationally available leader AcceleRate Financial went from a 1.10% interest rate on January 1 to 2.05% today.

If we go back to June 2021, Canadian Tire Bank sat atop our savings account comparison table, but now its rate ranks close to the bottom of the pack.

GIC rates have increased more broadly, but here too, the leaders have changed. At the beginning of 2022, Hubert Financial had the highest 1-year GIC rate at 2.00% (now 3.25%), and the highest 5-year GIC rate at 3.00% (now 4.35%). New leader Motive Financial’s 1-year rate went from 1.65% to 3.85%, and its 5-year rate went from 2.60% to 4.50%.

Are 1-year cashable GICs worth a look?

If you’re looking for a GIC, even savers who are committed to a GIC ladder might be hesitant to lock into new terms in this environment. If you’re still with one of the big banks, you could consider HSBC’s cashable 1 year GIC at 2.60% or CIBC’s cashable 1-year GIC at 2.00%.

Hubert Financial’s 1-year term, although not the highest rate, is a favourite in our discussion forum because it’s actually redeemable after every 3 months.

Where to stash your US dollars

EQ Bank’s 1.25% USD savings account often catches people’s attention, but Simplii Financial has a new USD account that earns 1.65% until September 30. Unfortunately, it does not support US dollar electronic funds transfers from other financial institutions yet.

We’ve also received a report that RBC is offering a 2.75% 1-year non-redeemable US dollar GIC.

A quartet of 3.00% promos

• Meridian Credit Union is offering 3.00% for the first 8 months in a new savings account, both registered and non-registered
• motusbank is offering 3.00% for the first 122 days in a new savings account, both registered and non-registered
• Simplii Financial’s latest new customer promo is 3.00% in a savings account until October 31, 2022
• Tangerine Bank’s latest new customer promo is 3.00% in a savings account for the first 5 months

Strategies for decumulating in retirement

Check out a recent forum discussion about strategies for decumulating in retirement, including website and book recommendations, and various factors to consider.

Your savings account should give you at least 1.50%

The Bank of Canada increased its key interest rate from 0.50% to 1.00% on April 13. This was the second of several expected increases this year, after being at 0.25% since 2020. Accordingly, there have been non-stop savings account interest rate increases over the past month, with even a couple of double increases. The largest increase was at Ideal Savings, whose TFSA interest rate went from 1.01% to 1.76%, although its regular savings account mysteriously remains at 1.01%.

Only 4 out of 19 savings accounts that we track have not increased their interest rates in 2022 (with Canadian Tire Bank even decreasing its rate back in February); those savings accounts now sit at the very bottom of our comparison chart.

Ontario-only Saven Financial has our first non-promo 2.00% savings account interest rate since 2020, although it doesn’t offer a TFSA. Future merger partners Hubert Financial and AcceleRate Financial both sit at 1.70% for their savings account and TFSA. If your financial institution is not giving you at least a 1.50% savings account interest rate, it’s behind the pack!

New deposit promos aren’t just for new customers

For the longest time, we used to complain that the highest savings account interest rates were only available in promotions for new clients. There are still plenty of new client promos out there, and we track many of them on our promotions page. New deposit promos for existing customers have been appearing like clockwork at Simplii Financial and Tangerine Bank for many years, but they are now available elsewhere, including:

• DUCA’s Earn More Savings Promotion account has been increased to 2.50% with an extended expiry date of December 31, 2022
• HSBC 2.35% (on less than $25,000) or 2.65% (on $25,000 or more) new deposit promo for new and existing customers in a High Rate Savings Account between April 4 and June 24, 2022
• RBC targeted new deposit promo for existing customers: 2.50% between May 5 and July 31, 2022
• Simplii Financial targeted 5-month new deposit promo for existing customers: 2.80% between May 1 and October 31, 2022
• Tangerine targeted 5-month new deposit promo for existing customers: 2.60% between May 6 and September 30, 2022

3.00% is becoming the GIC rate floor

On January 1 of this year, the top rates on our GIC comparison chart were 2.00% for a 1-year GIC and 3.00% for a 5-year GIC. We might soon consider 3.00% as the floor for 1-year GIC rates.

Last month, we saw the first 4.00% GIC in several years with Oaken Financial’s 5-year GIC. Now our top rates are a 3.35% 1-year GIC (or 3.68% through a GIC broker) and a 4.15% 5-year GIC.

PACE Credit Union conclusion

Follow its previous administration’s mismanagement, PACE Credit Union will soon be folded into another credit union, Alterna Savings. Under very different circumstances, these two credit unions had previously attempted and aborted a merger in 2014.

How closely do savings accounts track the Bank of Canada’s key interest rate?

Since the Bank of Canada’s 0.25% key interest rate increase on March 2, only 8 out of the 20 savings accounts we track have increased their interest rates. The most recent increase was just today at EQ Bank (from 1.25% to 1.50% for both its regular savings account and TFSA).

How does the gap compare historically? The current EQ Bank savings account interest rate of 1.50% is 1.00% higher than the Bank of Canada’s key interest rate of 0.50%. In early 2020, right before the onset of the COVID pandemic, EQ Bank’s savings account interest rate of 2.45% was 0.70% higher than the Bank of Canada’s key interest rate of 1.75%. Generally across financial institutions, that spread is higher now than it was in early 2020. Time will tell whether savings account interest rates will rise slower than the anticipated increases in the Bank of Canada’s key interest rate. The Bank of Canada’s next interest rate announcement is on April 13.

The leaders on our savings account comparison chart are unchanged from January: Wyth Financial for a regular savings account at 1.55% and Wealth One Bank of Canada for a TFSA at 1.50%.

GIC rates are rising much faster

Almost every day it seems as though there is a financial institution increasing its GIC rates. Although most 1-year rates are still below where they were in early 2020, they continue to increase, and many 5-year rates are much higher than they were 2 years ago.

CIBC’s headline 3.25% 5-year rate from January is now at 3.50%, you can get a 4-year or 5-year GIC through Scotia iTRADE at 3.65%, and EQ Bank and Oaken Financial are tied for the GIC rate lead on our GIC comparison chart at 3.70%. You can even get 3.85% through a GIC broker. This might still lag inflation, but it doesn’t seem crazy to imagine a 4.00% GIC before the year is over.

Income tax software tips

Back in 2019, we ran a survey on Canadian income tax filing, which revealed that 92% of Canadians who use tax software to file their income tax use one of StudioTax, TurboTax, SimpleTax (now Wealthsimple Tax), or UFile. Has the “Big 4” changed? Share your experience in our forum!

A different type of promotion at Tangerine

Every month, we seem to get another existing customer new deposit promo at Tangerine Bank and a fresh round of speculation on how they choose who to target. The latest one started on April 5 and is 2.40% for 5 months, which applies to registered, non-registered, CAD, and USD savings accounts.

In mid-March, however, some Tangerine customers were notified of a new type of savings account promotion. It was for a 2.80% interest rate for 5 months, which was the same as the targeted promo that some got at the beginning of March. But it was different in a few important ways. First of all, Tangerine customers were given advance notice of the promo. Second of all, the promo applies to their entire savings account balance. So far so good. But it only applies to Canadian dollar, non-registered savings accounts, and you must keep the balance in the account for the duration of the promo in order to get the higher rate. The next round of emails has already gone out for a similar promo starting in May, but for a rate of 2.20% over 7 months. Having trouble keeping up? Us too!

Correction: as pointed out in our forum, the new, “advanced” notice promotion states “you’ll have to keep the funds in your Account […] to keep earning your special rate” BUT you can withdraw funds any time during the promotion without losing the promo rate. You simply won’t be earning the promo rate on the funds you withdrew, since they’re not in the account anymore. Sorry for the confusion!

More promos and cash back for the rate chaser in you

• HSBC has a 2.25% (on less than $25,000) or 2.40% (on $25,000 or more) new deposit promo for new and existing customers in a High Rate Savings Account between April 4 and June 24
• EQ Bank sign-up bonus for new customers before April 18: $150 if you set up payroll direct deposit for 3 consecutive months
• Get $140 cash back or a $140 Amazon.ca gift card from High Interest Savings for opening a Scotiabank Passport Visa Infinite credit card

See our promotions page for more!