The Canada Revenue Agency confirmed this week that the prescribed rate on loans to family members will remain at 3% for the quarter beginning July 1. It is the fifth consecutive quarter at that level, the longest stable stretch since the rate began its descent from a 2024 high of 6%.
For advisors running prescribed rate loan strategies for clients, that stability has made the past year administratively simple. The rate that applied when a loan was struck in October 2025 is the same rate that applies today. But the input that determines the rate is now moving, even if the rate itself has not moved yet.
How the Rate Is Actually Set
The prescribed rate is calculated from the average yield on 90-day Government of Canada Treasury bills during the first month of the preceding quarter, rounded up to the next whole percentage point. The rate for Q3 2026 was therefore locked in based on April's Treasury bill yields, before this month's oil-driven bond rally began.
This means the rate has a built-in lag of roughly two months between when the underlying yield moves and when that move shows up in the prescribed rate clients see. A bond market shift in June will not affect the prescribed rate until the calculation for Q4, using July's yields, which the CRA will announce in September.
Why This Week's Bond Move Matters to That Calculation
The Government of Canada 10-year yield fell to 3.36% this week, its lowest level in more than three months. The move is being driven by the same story dominating the Market and Geopolitical desks today: oil has fallen below $70 a barrel as the Strait of Hormuz reopening progresses, easing the inflation premium that had been keeping Canadian yields elevated since the conflict began in February.
Short-term yields, including the 90-day Treasury bills that feed directly into the prescribed rate formula, tend to move with the same disinflationary signal, though with less amplitude than the long end of the curve. If that signal holds through July, the average 90-day yield for the month could come in low enough to produce a lower prescribed rate for Q4, the first reduction since the rate settled at 3% a year ago.
This is not a certainty. The Bank of Canada has held its policy rate at 2.25% and has signaled balanced risks rather than an easing bias, and a hawkish U.S. Federal Reserve under Chair Kevin Warsh has been pulling North American yields in the opposite direction since its June meeting. The two forces are currently offsetting each other, which is precisely why the path of the next two months of data matters more than usual.
What the Streak Means for a Loan Signed Today Versus One Signed in October
The prescribed rate that applies to a family loan is fixed at the rate in effect on the day the loan is made, for as long as that loan remains outstanding. This is the structural feature that makes the current moment a genuine planning decision rather than a wait-and-see exercise.
A client setting up a prescribed rate loan to split investment income with a lower-income spouse or adult child locks in today's 3% rate for the life of the loan, even if the rate later falls to 2% for new loans. Locking in now protects against the rate rising again later in a renewed inflation scare, but it forgoes the lower rate a client could get by waiting until Q4, if the bond market move proves durable.
For incorporated clients using prescribed rate loans for corporate-owned investment portfolios or family trust structures, the same trade-off applies at larger dollar amounts, where the difference between 3% and a hypothetical 2% Q4 rate compounds meaningfully over a multi-year loan term.
Treasury bill yields have tracked the broader Canadian rate environment closely over the past two years, falling from levels that produced a 6% prescribed rate in 2024 down to the 3% rate that has now held for five straight quarters.
The rate is set quarterly from the prior quarter's first-month average of 90-day Treasury bill yields, rounded up to the nearest whole point. Q4 2026 will be calculated from July yields and announced in September.
The Planning Bridge
The decision facing a client right now is not whether prescribed rate loans make sense in principle. It is timing. A client with investment income to split and a lower-income family member to lend to faces a real choice between locking in the known 3% rate today and waiting roughly three months to see whether the Q4 rate moves lower.
The honest answer for most clients is that the certainty of locking in now usually outweighs the uncertain benefit of waiting, particularly because the difference between a 3% and a possible 2% rate, while real, is small in absolute terms next to the cost of further delaying an income-splitting structure that compounds annually. The exception is a client already mid-decision who can reasonably wait ninety days without other consequences.