The Canada Revenue Agency confirmed the prescribed rate will hold at 3 percent for the fourth quarter of 2026, the sixth consecutive quarter at that level. The rate is calculated from the average yield on Government of Canada three-month treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point. July auction yields averaged 2.29 percent, which rounds up to 3.
Six flat quarters is not a technicality. The last time the rate sat at 3 percent before this stretch began was the fourth quarter of 2022, and it did not stay there, climbing to a peak of 6 percent by the first quarter of 2024 before falling back. The current run, from the third quarter of 2025 through the fourth quarter of 2026, is the longest the rate has held any single level since the mechanism was introduced.
The Math Behind a Flat 3 Percent
A prescribed rate loan lets an individual lend money to a spouse or a family trust at the CRA rate in effect when the loan is made, with the borrower investing the funds and paying the lender interest annually at that fixed rate. Any investment return above the loan rate is taxed in the lower-income borrower hands rather than the lender hands, provided the interest is actually paid by January 30 each year. The loan is not retroactively adjusted when the quarterly rate changes afterward. A loan set up this quarter keeps its 3 percent rate for as long as the loan is outstanding, even if the prescribed rate rises to 4 or 5 percent in 2027.
That locking mechanism is what makes six flat quarters different from a single low reading. A family that set up a loan in the third quarter of 2025 has already banked three additional quarters of the same rate without having to re-paper anything, and a family setting one up in the fourth quarter of 2026 gets the same 3 percent starting point with no way to know whether it will still be available in the first quarter of 2027.
Who Should Act Before the Rate Recalculates
Corporate investment accounts and family trust structures are where this window has the most reach. A business owner with a Canadian-controlled private corporation and a lower-income spouse or adult child can use a prescribed rate loan into a family trust to split investment income without running into the tax on split income rules that constrain direct dividend sprinkling. The strategy works on the corporate investment account side too, where retained earnings sitting in passive investments can be lent out at the same locked rate.
The next treasury bill auction that feeds the calculation happens in October, ahead of the January 2027 rate announcement. Whether that reading pushes the rate up depends heavily on where Government of Canada short-term yields sit once the Bank of Canada policy path becomes clearer following its October 28 decision. The planning bridge for this quarter is simple: any client considering a prescribed rate loan structure who has been waiting for a better rate has already had six quarters of the best rate available since 2022, and there is no guarantee the fourth quarter is not the last one at this level.
The quarterly rate history traces the full round trip: a climb from 1 percent in early 2022 to a peak of 6 percent by the first quarter of 2024, then a steady decline into the six-quarter hold at 3 percent that runs through the current quarter.
The rate peaked at 6 percent in the first quarter of 2024 and has held at 3 percent since the third quarter of 2025. Source: Canada Revenue Agency.