The Prescribed Rate Holds at 3% for a Sixth Quarter, and the Two-Year Yield Is Already Above It

The Canada Revenue Agency prescribed interest rate is unchanged at 3% for the sixth consecutive quarter, and loans made at the current rate keep it for their full life. Family income-splitting planning turns on the timing of the loan and on paying the interest on schedule. Photo: iStock.

Tax & Wealth

The Prescribed Rate Holds at 3% for a Sixth Quarter, and the Two-Year Yield Is Already Above It

Oct 9, 2026 6 min The Tax & Wealth Desk

The Brief

The CRA prescribed rate is 3% for Q4 2026, its sixth consecutive quarter at that level, down from 6% in the first half of 2024.
The three-month T-bill yield was 2.39% on October 7, which leaves 0.61 percentage points before the rounded-up rate would reach 4%.
The Government of Canada two-year yield was 3.25% on October 8, which prices a policy rate above the 2.25% the Bank of Canada held in September.
A loan made before December 31 keeps 3% for its life, provided the borrowing spouse or trust pays the interest by January 30 of each year.
The first interest payment on a Q4 loan is due January 30, 2027, 113 days from today. A missed payment attributes the income back to the lender for that year and every later year.

The Canada Revenue Agency prescribed rate is 3% for the fourth quarter of 2026, its sixth consecutive quarter at that level. A loan made between now and December 31 keeps 3% for as long as it stays outstanding and the interest is paid on time. The more useful number for planning is 2.39%, the three-month Government of Canada T-bill yield on October 7 according to Bank of Canada data, because October auctions set the Q1 2027 rate.

The rate is the average three-month T-bill yield from the first month of the preceding quarter, rounded up to the next whole percentage. July auctions averaged 2.29%, which produced 3% for Q4. A reading of 2.39% leaves 0.61 percentage points before the average would pass 3.00% and push the rate to 4%.

The Cushion Is Real, and the Yield Curve Says It Is Finite

The Bank of Canada held its overnight rate at 2.25% on September 2. The market is pricing something different further out. The Government of Canada two-year yield was 3.25% on October 8, according to Trading Economics, 0.86 percentage points above the T-bill. The five-year yield was 3.60% and the ten-year yield 3.93%.

A two-year yield above 3.00% does not mean the Q1 2027 rate moves. October T-bill yields would need to average above 3.00% for that, and the latest readings are 2.39%. It does mean a prescribed rate of 4% becomes a live possibility for a later quarter if the Bank of Canada follows the path the bond market describes.

The prescribed rate has fallen from 6% in the first half of 2024 to 3%, where it has stayed for six quarters, and the October T-bill sits 0.61 points below the level that would lift it to 4%.

CRA PRESCRIBED RATE, QUARTERLY 3% ▼ 3 PT SINCE Q1 2024 QUARTERLY | Q3 2023 TO Q4 2026

Source: Canada Revenue Agency, prescribed interest rates, Q3 2023 to Q4 2026; Bank of Canada, 3-month treasury bill yield, October 7, 2026. | hdq.ca

The prescribed rate is the average yield on three-month Government of Canada T-bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage. The Q1 2027 rate will be set from October 2026 auctions.

What a Q4 Loan Locks and What It Requires

A loan made at the prescribed rate to a spouse, common-law partner, family member or family trust shifts investment income from the lender to a family member in a lower tax bracket, without triggering attribution, if two conditions hold. The rate on the promissory note must be at least the prescribed rate in effect when the loan was made, and the interest for each calendar year must actually be paid by January 30 of the following year.

For a loan made in Q4 2026, the first payment covers the period to December 31 and is due January 30, 2027, 113 days from today. If a payment is missed, the investment income is attributed back to the lender for that year and for all later years. TaxTips.ca also notes that the interest should be paid by the borrowing spouse, with records that make the payer clear, and that joint accounts can cause problems.

Why the Hurdle Is Lower Than It Looks

A $400,000 loan at 3% carries $12,000 of annual interest. The borrowing spouse deducts it and the lender reports it. Every percentage point the borrowed money earns above 3%, or $4,000 on $400,000, is taxed at the marginal rate of the borrowing spouse. A Government of Canada five-year bond yielding 3.60% would clear the hurdle by 0.60 points, or $2,400 a year before tax, so covering the cost does not require a risky portfolio.

Existing loans keep the rate in force when they were made, which means loans made from the third quarter of 2023 through the fourth quarter of 2024 carry 5% or 6% for their remaining life. TaxTips.ca notes that refinancing a higher-rate loan at the current rate would likely trigger attribution, so the 3% rate is available only to new loans.

Which Accounts Fit and Which Do Not

The loan strategy applies to non-registered money held in a separate account in the name of the borrowing spouse. TFSA and RRSP room comes first in most household plans because income inside those accounts is sheltered. Gifts from a spouse to fund a TFSA contribution do not attract attribution on the income earned inside the account. A spousal RRSP produces a related result through a different mechanism, a three-calendar-year attribution window on withdrawals.

For money that is already outside registered accounts, the prescribed rate loan is the remaining tool, and a family trust that distributes to lower-bracket family members is the structure used where several beneficiaries are involved. The planning deadlines are December 31 for the loan to be made at the Q4 rate and January 30, 2027 for the first interest payment. The Q1 2027 rate should be confirmed once the October auctions are complete.

Sources

Canada Revenue Agency, prescribed interest rates, Q3 2023 to Q4 2026 (canada.ca); Bank of Canada, 3-month treasury bill yields, September 9 to October 7, 2026; Trading Economics, Canada government bond yields and Bank of Canada rate, October 8, 2026; Advisor.ca, Prescribed rate to remain 3% in Q4 for sixth consecutive quarter, July 30, 2026; TaxTips.ca, Lending to a spouse or child

Educational content only. This article is published for informational and professional development purposes. It does not constitute investment advice, financial planning advice, or a recommendation to buy or sell any security. Canadian advisors should apply their own professional judgment. Full disclaimer.

Advisor Toolkits — Oct 9, 2026

🛡️ Respond ▼

What They're Feeling

Clients who already hold a prescribed rate loan at 5% or 6% feel stuck: they see 3% in the headlines and assume they should have waited. Clients without one are mostly uncertain, not anxious. They have heard of income splitting from a friend or an accountant and are unsure whether the rule has changed since the rate fell, and whether a late payment can undo the whole arrangement.

What to Say

The CRA rate for loans between family members is 3% for the fourth quarter, the sixth quarter in a row at that level. A loan made at 3% keeps that rate for as long as it stays in place, as long as the interest is paid by January 30 every year. The rate for next quarter looks stable because short-term government yields are about 0.6 points below the level that would push it to 4%. Longer-term yields are higher, so I would not assume 3% lasts indefinitely. If the idea fits your situation, the next steps are to confirm which account the money would come from, who would hold the loan, and how the first interest payment will be made on time. I will work through that with you and your accountant.

Who's Affected

High impact: couples with a large income gap and substantial non-registered assets held by the higher earner, and families with a trust or planning to set one up.

Mixed impact: clients with existing prescribed rate loans made in 2023 or 2024 at 5% or 6%, where the loan keeps its original rate and cannot be simply refinanced at 3%.

Potential benefit: couples who have used their TFSA and RRSP room, have unregistered savings, and have not yet used spousal loans, and clients approaching retirement who expect a lower-income spouse to draw less than the lender.

Action Checklist

List clients with a large income gap between spouses and non-registered assets above their comfort level for holding in one name.

Identify existing prescribed rate loans, the rate on each promissory note, and confirm the interest was paid on time every January.

Confirm TFSA and RRSP room is used before recommending a loan for non-registered money.

Put December 31, 2026 and January 30, 2027 in the client calendar for any loan being considered this quarter.

Ask the accountant of each client to confirm marginal rates for both spouses before sizing a loan.

Document that the borrowing spouse pays the interest from money outside the loaned amount.

Follow-Up Email Template

Subject: Family loan rate stays at 3% for the fourth quarter

Hi [Client Name],

Thank you for speaking with me today. Here is the short version of what we discussed.

The CRA rate for loans between family members is 3% for the fourth quarter, the sixth quarter in a row. A loan made this quarter keeps 3% for as long as it stays in place, as long as the interest is paid by January 30 of each year. The first payment for a loan made this quarter would be due January 30, 2027.

Short-term government yields suggest the rate is likely to stay at 3% next quarter, but longer-term yields are higher, so it may not stay there indefinitely. If you would like to look at whether this approach fits your situation, I am happy to set up a call with you and your accountant on [Date].

[Your Name]

This communication is for educational purposes only and does not constitute personalized investment advice.

🎯 Prospect ▼

Client Profiles to Target

Higher-income spouses with large non-registered accounts: the strategy moves investment income to the lower-income spouse, and the client does not need a business or a trust.

Business owners who have taken dividends and invested the proceeds personally: a family member in a lower bracket may be the better holder of the investment income.

Self-directed investors who have heard of the strategy but have not used it: they often miss the January 30 payment rule and the need for a separate account.

Opening Line

The CRA family loan rate is 3% again this quarter, the sixth quarter in a row, and a loan made at that rate keeps it for as long as it is in place. Is income splitting between you and your spouse something you have looked at?

Value Proposition

The prescribed rate has fallen from 6% to 3% in under three years, and a loan made now locks the rate. The window is not closing in Q1 2027, because T-bill yields sit 0.61 points below the level that would raise the rate, but the two-year government yield of 3.25% shows the bond market expects higher short-term rates later.

The strategy fails on administrative details: a late interest payment, a joint account, or an unregistered gift. A prospect managing this alone has no one to check those details. An advisor who tracks the January 30 deadline and the account structure removes that risk.

Discovery Questions

Who holds your non-registered investments today, you or your spouse?

Do you and your spouse have similar incomes, or is one of you in a much higher tax bracket?

Have you used your TFSA and RRSP room for both of you this year?

Have you ever made a loan to a spouse or a family trust, and was the interest paid every January?

Who helps you with tax planning, and have you talked with them about income splitting?

Prospecting Email Template

Subject: The family loan rate is 3% this quarter

Hi [Prospect Name],

The CRA rate for loans between family members is 3% for the fourth quarter, the sixth quarter in a row. A loan made at that rate keeps it for as long as it stays in place, which makes this quarter relevant for couples with a large income gap and non-registered savings.

The strategy depends on a few details, including a January 30 interest deadline each year and keeping the money in a separate account. I would be glad to walk you through how it works and whether it fits your situation. Would a 15-minute call on [Date] work?

[Your Name]

This communication is for educational purposes only and does not constitute personalized investment advice.