The Canada Revenue Agency confirmed the prescribed interest rate for the fourth quarter of 2026 will remain at 3 percent, the sixth consecutive quarter at that level. The rate is set each quarter from the average yield on 90-day Government of Canada Treasury Bills auctioned in the first month of the preceding quarter, then rounded up to the nearest whole percentage point. July auctions averaged 2.29 percent, which rounds to the 3 percent rate now confirmed for October through December.
The mechanism that sets the next rate is already moving. The three month T-bill yield stood at 2.35 percent as of September 16, up from the 2.29 percent that produced the current rate, and October auctions, which will determine the first quarter of 2027, arrive weeks after the Federal Reserve raised its policy rate to 3.75 to 4.00 percent and signalled at least one more increase before year end.
The Loans This Actually Moves
Prescribed rate loans let a higher earning spouse, partner, or family member lend funds to a lower earning spouse, partner, or family trust at the CRA prescribed rate, with the borrower investing the funds and paying tax at their own lower bracket on any return above the loan interest. The strategy works cleanly with trust structures used for adult children or grandchildren, and it works for spousal income splitting outside a trust as well. The lower the prescribed rate, the wider the gap between what the borrower pays the lender and what a reasonably invested portfolio can be expected to return, which is the mechanism behind the tax saving.
The prescribed rate has sat in a narrow band for the past four years, falling from 6 percent in early 2024 to 3 percent by the third quarter of 2025 and holding there for six straight quarters since.
The prescribed rate is set quarterly from Treasury Bill auctions in the first month of the preceding quarter, rounded up to the nearest whole percent. The current run of six quarters at 3 percent is the longest stretch since the rate began falling from its 2024 peak.
The Deadline That Matters More Than the Forecast
Whether the rate holds at 3 percent or moves higher in 2027 does not change what existing loans require now. Interest on a prescribed rate loan made in 2026 must be paid by January 30, 2027, and the Canada Revenue Agency has stated that payment by promissory note does not satisfy the requirement. Missing the deadline attributes the investment income back to the lender for that year and every year after.
The rate lock-in cuts the other way for anyone still deciding. A loan established this quarter carries the 3 percent rate for its entire life, regardless of where the posted rate goes afterward. A client who waits for confirmation that rates are rising loses the option to lock in the rate that made the strategy attractive in the first place.