The Bank of Canada raised its policy rate to 2.50% on October 28, yet the Canada Revenue Agency prescribed rate that governs family loans remains 3% for the fourth quarter. It has held at that level for six consecutive quarters, since the third quarter of 2025. The two rates are linked by a formula with a lag, and the lag is what matters now.
The CRA sets the prescribed rate from the average three-month Treasury bill yield in the first month of the preceding quarter, rounded up to the next whole percentage point. The rate for the first quarter of 2027 is therefore fixed by October 2026 yields. The three-month bill yielded 2.54% on October 28, up about 0.14 percentage points over the month, according to Trading Economics. An October average in that range rounds up to 3%, although the CRA publishes the official figure itself.
The prescribed rate rose from 1% in mid-2022 to 6% in early 2024 and has since returned to 3%, and a loan keeps the rate in force in the quarter it is signed.
The rate applies to loans made in the quarter shown and does not change for the life of a qualifying loan. The CRA derives it from the average three-month Treasury bill yield in the first month of the preceding quarter, rounded up to the next whole percentage point.
Why the Hike Has Not Moved the Rate Yet
The formula looks backward by design. The rate for the second quarter of 2027 will rest on January 2027 yields, so it will reflect the October 28 increase only if bills reprice by then. To lift that rate to 4%, the January average would need to exceed 3.00%, which is more than 0.46 percentage points above the October 28 level.
The three-month bill is trading about four basis points above the new 2.50% policy rate. On that relationship, a single December move to 2.75% would leave the January average below the 3.00% threshold, though yields can move ahead of the Bank. Reuters reported that markets expect several more increases over the next year, which is the scenario that would push the rate to 4%.
The chart shows how slowly the rate responds. The Bank began raising rates on March 2, 2022, but the prescribed rate stayed at 1% through the second quarter of 2022 and first rose in the third quarter.
What Locking Actually Fixes
A prescribed rate loan from a higher-income spouse or to a family trust is made at the rate in effect when the loan is signed, and that rate stays fixed for the life of the loan. The borrower must pay the interest no later than January 30 of the following year, every year. A missed payment brings the attribution rules back, and the income returns to the lender.
Timing carries a detail that the headline rate hides. A loan signed before December 31 locks the fourth-quarter rate of 3%, but its first interest payment falls due on January 30, 2027. A loan signed in January locks the first-quarter 2027 rate, which on current yields also rounds to 3%, and its first payment is due January 30, 2028. Older loans signed at 1% or 2% remain locked and now carry the largest advantage.
Where the Strategy Weakens
A loan only pays if the borrower earns more than 3% after costs. The three-month bill yields 2.54%, so cash alone does not clear the hurdle, and the spread has to come from longer-dated or equity returns that carry risk. The lender also reports the interest as income at a higher marginal rate, so the benefit is the return above 3% moved into lower-bracket hands.
Registered accounts compete for the same dollars. The 2026 limits are 7,000 dollars for the TFSA and 8,000 dollars for the FHSA, both with a December 31 contribution deadline, and 33,810 dollars for the RRSP, which has a March 1, 2027 deadline. The federal budget arrives on November 5, and no personal tax measures have been confirmed ahead of it.