Skip to main content

A sound alternative to taking a beating in bonds right now is to use guaranteed investment certificates instead. Now happens to be a great time to buy GICs.

GICs are used by banks and other financials to raise money for lending, including mortgages. It’s spring, peak season for home sales. And so, we’re seeing a more competitive GIC market than we’ve had in a while. You can see this in the rates available through digital brokers – a.k.a. online brokers.

I recently took a look at one big bank-owned broker’s inventory of third-party GICs and found a five-year rate of 3.76 per cent from Canadian Tire Bank and 3.75 per cent from HomeEquity Bank. Another broker offered 3.73 per cent from Concentra Bank and 3.7 per cent from a couple of different credit unions. As of first thing Thursday morning, the best rate around for five years was 4 per cent from Oaken Financial.

If you’ve tried to buy GICs from a digital broker, you’ll know how exceptional it is to be able to get a rate that is near the top of the market. GICs from the likes of Oaken and competitor EQ Bank are not typically available through digital brokers; instead, these issuers deal directly with investors. Digital brokers usually offer GICs from a wide range of issuers, but not the ones with the best rates.

One-year GIC rates from digital brokers are also competitive right now. One broker had a 2.7-per-cent rate from Effort Trust in its inventory, compared with 2.8 per cent at Oaken and 2.6 per-cent at EQ and elsewhere. Effort Trust may be an unfamiliar name, but it is a member of Canada Deposit Insurance Corp.

The best deal in GICs right now might be the three-year term. The same broker mentioned just above had a three-year GIC from General Bank of Canada at 3.65 per cent, in line with EQ Bank and just off Oaken’s 3.8-per-cent rate.

DIY investors buying GICs through a digital broker have long had to settle for decidedly second-best rates, or compromise on convenience and efficiency by maintaining a separate GIC account at another company. For now, premium GIC rates are there for the taking.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.