An interest rate forecast for conservative investors in 2015 in four words: More of the same.
The Canadian economy seems to be firming, in part because the U.S. economy is waking up after a long slump. But the drag caused by low oil prices may dissuade the Bank of Canada from pushing borrowing costs of their current historic lows. If rates do rise, it will likely add only a modest premium to today's low yields on bonds and guaranteed investment certificates.
Looking for the best returns from low-risk investments? Then check out this quick guide to being a high-rate ranger:
- Shop the market: There are quite a few rate comparison sites, but many do not offer a full survey of the market place. I find Cannex to be thorough in its rate comparisons.
- Verify if the rate is actually the rate, or just a teaser: Teaser rates are designed to lure the business of people with a short attention span. Look for consistently good rates, not periodic teasers that usually revert back to unimpressive yields in a few months.
- Compare TFSA and non-registered rates: Rates for tax-free savings accounts can in some cases be higher.
- Are you dealing with a big bank? If you are, you’re almost certainly not getting a premium rate.
- Are you dealing with a trust company or alternative bank? No worries if you are as long as it’s a member of Canada Deposit Insurance Corp. CDIC protects deposits up to $100,000. Once your GICs top out at that level at a particular bank or trust, find another firm or any additional money.
- Are you dealing with a credit union? Rather than being members of CDIC, credit unions have built their own provincial deposit insurance plans. These plans do not have the backing of the federal government, but they do in some provinces offer unlimited coverage.
- Check customer satisfaction: Check out what people are saying about a particular financial institution on the Canadian High Interest Savings Bank Accounts website.
- GICs beat bonds: You sacrifice liquidity with GICs (the non-cashable type, at least) in exchange for rates that beat the majority of investment grade government and corporate bonds.
- Face reality: Late in 2014, the best five-year GIC rate that I could find was 2.95 per cent at Hubert Financial, an online bank operated by Manitoba’s Sunova Credit Union.