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The online bank Oaken Financial started a golden age of GIC investing in June, 2022, when it introduced a 5-per-cent rate for a five-year term.

Now, Oaken may have signalled a peak for GIC investing with an offer of 6 per cent available late this week for terms of 12, 18 and 24 months. It’s not so much the 6-per-cent rate that is noteworthy here. Rather, it’s the fact that a financial market indicator that influences GIC rates took a dive this week. GIC, investors, you may not see 6 per cent again in your lifetime.

Insert caveat here: Rates on GICs are influenced by rates on government bonds, which have zigzagged a lot lately as the outlook for inflation has evolved. Most recently, worries about inflation sent bond yields soaring in September and October. Now, that increase has started to unwind in a way that suggests GIC rates could edge lower.

Six-per-cent GICs have been available here and there for several weeks. Tangerine had a 6-per-cent offer, and now several GIC brokers have rates as high as 6.19 per cent for one year. Five-year rates are lower, but 5 per cent is easily found.

When is a GIC worth investing in?

The big variable on rates is inflation. The year-over-year inflation rate fell to 3.8 per cent in September from 4 per cent in the previous month. If there are signs inflation continues to edge toward the Bank of Canada’s target rate of 2 per cent, then rates in the bond market will fall and put downward pressure on GIC returns.

We’ll still see deals on GIC rates, though. GICs are issued by banks and other financial institutions to fund mortgage lending. If a bank wants to juice its mortgage business, attracting money through competitive GIC rates is a way to start the process.

Now remains an ideal time to put money into GICs, if that’s the right fit for your finances. A risk-free 5 to 6 per cent is a great thing in today’s uncertain world, but there’s a heavy tax burden on GIC interest in nonregistered accounts. Another GIC pitfall is clinging to safety when there’s a chance for superior returns in the stock market if you have a long-term perspective. If stocks pull back on recession fears, that’s a buying opportunity.

An indicator of how good GIC rates are right now: Five per cent on a five-year term was available via special offers late this week from several of the big banks. This has to be one of the lowest-risk ways to lock in a 5-per-cent return for five years.

The CRA announced a last-minute extension for the deadline of which program? Take our business quiz

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