GIC ladder for 3 or 5 years with current rates flat from 3 to 5 years | GIC discussions | Discussion forum

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Some good questions there ⬆, RicksBank! And you're bound to get some good answers from this group.

For myself, I'd suggest you open up an Oaken account, to complement the account(s) you already have with EQ.

Both Oaken & EQ have always been GIC 'Top Contenders', and it's always good to have your $$$ in more than one FI (for a number of reasons you're probably already aware of).

My Two Centavos

Dean

Lots of good questions!

For starters, assuming this is non-registered money and that you don't have to keep husband and wife accounts separate for some reason, I would definitely suggest you move over to Oaken.

Here's why. With Oaken, you can use both HOme Trust and Home Bank, each of which has CDIC insurance, so you can cover up to 200K. Then you can put these GICs in both your names. When one of you dies, it will all automatically belong to the remiaining spouse, no probate tax.

Perasonally, I don't think this is enough money to bother with using multiple FIs, but you could if you want, and you might end up with more income. I just think it's too much bother for these amounts.

I used to think that current rates are related to what they think rates will be down the road,b ut I am less inclined to think that now. I think they are more related to the current rates for borrowers. It's more about where YOU think rates will be in 3 to 4 years, and that's a crystal ball question. My guess is that they will remain high, but I could be wrong.

If you are not sure of your comfort level wih locking in money, you might be better with a shorter ladder. Certainly times are volatile right now on several fronts and many things can change in even 3 years.
For an older person , especially if health issues, or for anyone who might possibly want access to the money I might suggest a shorter ladder, but that doesn't seem to be your situation.

You can also hedge your bets on rates by creating two ladders - one for 3 years and one for 5 years. With relatively small amounts as you have, this may be more trouble than it's worth, but you can see the point. The 4 and 5 year amounts are then eachonly 10% of the total, whereas in a regular 5 year ladder they would be 20%.

Something else to consider is staggering your purchases so as to take advantage of (hopefully) rising rates. You could buy one GiC every two months until end of the year for a 5 year ladder.

cgouimet said

One 'Quirk' with Oaken ...

Online transfers only triggered from Oaken and only directly to/from the big 5 banks (BMO, CIBC, RBC, Scotia and TD) plus EQ Bank, HSBC, National Bank and Tangerine ...

Tansfers to/from any other FI needs a pit-stop at one of the above ...  

I prefer to call it a 'Wart' ... and as many of us know, Oaken has more than one.

But for Non-registered $$$, I still deal with them because of their high rates and the two CDIC Insured FI's they represent/offer.

Parting Shot ➡ "In the end, no FI is perfect"

Dean

When you buy your GIC you will stipulate whether it's to be a Home Trust or Home Bank GIC, either can be funded from your Home Trust savings account. Just be careful when they mature, if you direct that the funds go back to your Home Trust savings account you could be over the CDIC limit in that account.

RicksBank said
Wow, lots of good replies already, thanks everyone!

You convinced me to open accounts at Oaken. Thanks for that.

When it got to the question if I was creating a joint account, I said NO for now, I guess only because I would have had to say that the joint person wasn't an Oaken client since my wife hasn't applied yet. Did I mess that up? Is an entire account joint, or just individual savings accounts and GICs within it? Can each GIC, besides choosing Home Bank or Home Trust, also be specified as joint or not? Oh, I'm assuming I can create multiple Savings accounts (with nicknames?) within my account like I can at Tangerine and EQ? Then, can some individually be specified as joint?  

You now have an Oaken Client Number and a personal Savings Account with either HB or HT.

You can go through the same process for your wife: a new Client number for her and a personal Savings Account with either HB or HT.

Whether you are both with Savings at HB or HT or not doesn't matter.

You can then open new Accounts (Savings or GIC), for either HB or HT, one at a time for either Client or both Jointly as you wish ...

I split the diff and took half this year's ladder this month, the other half hedging against more rate increases.

And I will join in reminding folks nearing age 70 to pay close attention to their RRSP/RRIF etc. age-deadlined funds when planning ladders. There can be tax consequences or penalties if you lock funds into an account you have to get them out of!
RetirEd

...I just finished posting in another thread (Quebec GICs) why I would also consider Peoples Trust/Bank.

A 1% change would be welcome, but I don't think it likely. When's the last time the BoC moved rates up sufficiently decisively?

The last change was 50 basis points and EQ had a 1-yr leading rate of 2.9% and it barely moved the needle, rising to 3%.

The interesting thing, though, is that rates have continued to climb SINCE the B0C's last hike, clearly anticipating more hikes.

More Bank of Canada hikes are coming.

The bank has signalled its intention is to bring the policy rate, now at 1%, up to at least neutral. That neutral rate for the economy is believed to be somewhere between 2% and 3%.

Not sure why Bank of Canada would shock the system at this point when they continue to believe inflation can take care of itself by end of next year. These were among statements made yesterday:

Our latest outlook is for inflation to average almost 6% in the first half of 2022 and remain well above our 1% to 3% control range throughout this year. We then expect it to ease to about 2½% in the second half of 2023 before returning to the 2% target in 2024.

… We can’t control or even influence the prices of most internationally traded goods. But if Canadians’ expectations of inflation stay anchored on the 2% target, inflation in Canada will come back down when global inflationary pressures from higher oil prices and clogged supply chains abate.