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!