The prescribed rate is determined by the Canada Revenue Agency (CRA) each quarter and applies to loans made during that quarter. The current interest rate used for low-interest loans is 3% as of Q1 2026.
It fell to 1% in 2020 for 2 years following the pandemic onset and was 1% as well for several years during the 2010s. As a result, lots of taxpayers took advantage of this low threshold and established loans that are still at that same low rate.
Repaying a spousal loan
You are not required to repay a spousal loan, though you are required to make the annual interest payments by January 30 to avoid income attribution. You may need or choose to repay the loan at some point.
The borrower can pay back the spousal loan principal using any source, including the investments purchased with the borrowed funds. The borrower can also use their income or other assets to repay a loan.
Selling investments purchased with the borrowed funds can trigger capital gains.
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Forgiving a spousal loan during your life
If you forgive a spousal loan during your lifetime, special tax rules called “debt-forgiveness rules” may apply to the spouse who borrowed the money. The borrower may have to reduce their non-capital or capital loss carryforwards, if they have any, by up to the amount of the debt forgiven.
Otherwise, they need to reduce the adjusted cost base for depreciable or capital property to increase the future capital gain on sale for these assets.
Any remaining forgiven amount is included in the borrower’s income as a capital gain in the year the loan is forgiven.
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Forgiving a spousal loan on death
A spousal loan is not required to be repaid or forgiven. In fact, it can remain outstanding for many years with the initial interest rate when the loan was made continuing to apply.
If the lender dies and the loan is forgiven upon their death, the debt forgiveness rules do not apply. Nor do the spousal attribution rules apply to income earned from assets purchased by the borrower with the spousal loan.
Summary
Spousal loans require proper documentation, tax reporting, and adherence to the annual interest payment rules.
There can be adverse tax implications if a loan is forgiven. Although a spousal loan does not need to be repaid, there may be cases where it makes sense to do so.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. and Objective Tax & Accounting Inc. in Toronto. He does not sell any financial products whatsoever.
In reality, lenders look at a much bigger picture. Credit history matters, but so do income stability, existing debt, and how you approach the application itself. While there’s no guaranteed formula for approval, there are steps you can take to improve your odds, without pretending your finances are flawless.
Here’s what Canadian lenders typically look for, and what you can realistically do to strengthen your application.
1. Strengthen your credit score
There’s no way around it: your credit score plays a meaningful role in whether you’re approved for a personal loan. Most Canadian lenders rely on credit reports from Equifax and TransUnion to understand how you’ve managed borrowing in the past.
Credit scores are often grouped into rough ranges:
Excellent: 760+
Very good: 725–759
Good: 660–724
Fair: 560–659
Below 560: Limited options, usually with higher interest rates
That said, lenders don’t expect perfection. Many people apply for personal loans specifically because their credit utilization is high or they’re struggling with revolving debt. A lower score doesn’t automatically mean rejection; it simply affects which lenders are likely to approve you and at what cost.
What helps most:
Pay everything on time. Payment history is one of the biggest drivers of your score and a major trust signal for lenders.
Be cautious with new applications. Applying for multiple loans or cards in a short period can lower your score slightly and can look worse to lenders.
Keep older accounts open if you can. Closing long-standing accounts can reduce the length of your credit history.
A note on credit utilization: you’ll often see advice like “keep it below 30%.” That’s a helpful target, but it isn’t always realistic if you’re applying because you’re stretched. The key point is that high revolving balances can weigh on both your credit score and approval odds, and one purpose of a debt consolidation-style loan can be reducing that revolving pressure over time.
2. Show stable income and employment
When lenders review your application, they’re ultimately trying to answer one question: Can you reasonably repay this loan? Stable income and employment go a long way toward answering that.
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Lenders generally feel more comfortable when borrowers have been with the same employer for several months, work full time or on a long-term contract, and can clearly document their income. That documentation might include recent pay stubs, notices of assessment, or bank statements showing regular deposits.
If you’re self-employed or freelance, approval is still possible, but lenders will usually want more context. One or two years of tax returns, along with evidence of consistent income, helps show that your earnings are reliable rather than sporadic. In many cases, applications don’t fail because income is too low, but because it’s hard to verify. Making your income easy to understand can significantly improve your chances.
3. Lower your debt-to-income ratio (DTI)
Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. Many Canadian lenders prefer to see this ratio under 40%, and some banks aim closer to 35%. These figures are often treated as rules, but they’re really guidelines.
In reality, plenty of people apply for personal loans precisely because their debt-to-income ratio is already higher than recommended, often due to credit card balances with high interest rates. Lenders take this context into account. If a loan reduces multiple payments into one more manageable obligation, it may actually improve your overall financial picture.
That said, DTI still matters because it affects affordability. If there are small ways to reduce it before applying, such as paying down a portion of a revolving balance, avoiding new debt, or temporarily increasing income, it can help. But the bigger goal is ensuring that the loan payment fits comfortably within your budget, not forcing your finances to meet an ideal ratio on paper.
4. Ask for a realistic loan amount
One reason personal loan applications can be declined is simply asking for too much. Lenders assess loan size in relation to your income, existing debt, and credit history, and an amount that feels out of sync can trigger a rejection.
At the same time, applying for less than you actually need doesn’t guarantee approval. The better approach is realism: borrow enough to solve the problem you’re facing, without stretching your finances further. In many cases, lenders will counter with a different amount or term based on what they’re comfortable offering anyway.
Applying for a reasonable loan size can improve approval odds and help ensure the loan actually solves a problem instead of creating a new one.
If you personally pay for expenses on behalf of your company, it owes you for these personally paid corporate expenses. You can be reimbursed tax-free.
If you deposit money to your corporation, the same situation applies—that is, you are owed money back tax-free. This situation can occur if you have to top up your corporate bank account or deposit money to be used for a real estate down payment for the company.
The rest of this summary will focus on situations where you owe money to your corporation.
Clearing a loan with a bonus or dividends
Some business owners take withdrawals over the course of the year from their corporation without running them through payroll. At year-end, you can address this by declaring a bonus with payroll withholding tax payable in January. This bonus has the identical tax treatment to salary, as both are reported as employment income on your T4 slip.
The other alternative is to declare a shareholder dividend. This has no withholding tax. The tax implications will instead be a combination of corporate and personal tax. This is because unlike a salary or bonus, dividends are not tax deductible for a corporation. Since a dividend is a distribution of after-tax corporate profits, the personal tax payable is lower than a salary or bonus.
However, the all-in tax is comparable, and in most cases, higher than paying a salary or bonus at most income levels in most provinces and territories.
Income Tax Guide for Canadians
Deadlines, tax tips and more
Shareholder loan taxation
If you want to loan money to yourself or a family member from your corporation, this is generally considered taxable income. The default assumption by the Canada Revenue Agency (CRA) is that loans are disguised as compensation unless a specific exemption applies.
The primary exception is if you repay the loan within one year after the corporation’s fiscal year end. For example, a loan outstanding on December 31, 2025 for a corporation with a calendar year-end needs to be repaid by December 31, 2026. If not, it will be considered taxable.
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The CRA does not like when you engage in a series of loans and repayments, either, and may treat the original loan as being taxable. So, be careful about back-to-back loans.
Employee loans
There is a very narrow exemption for loans to employees for specific purposes like buying a work vehicle for employment duties, a home, or shares of the employer. It does not happen often in real life, and owner-managers who think they can loan money to themselves under this exception are probably out of luck. Specified employees who own 10% or more of a company cannot qualify.
Interest and principal benefits
Business owners and their accountants often overlook the deemed interest benefit of a shareholder loan. There should be an income inclusion for the notional interest on the loan. The rate applied is CRA’s prescribed rate. As of Q1 2026, the rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%.
If a loan is forgiven, the principal may be considered a taxable benefit to the owner-manager. The problem is that the corporation may not get a tax deduction, so there is an element of double taxation that may apply.
Inter-company loans
If an owner-manager owns more than one corporation, they sometimes lend money between two companies. You may be able to loan money between two companies you own without triggering tax.
If you are loaning money between an operating company that is a going concern and an investment holding company, be careful about exposing shareholder loan assets owned by the operating business to company creditors. In some cases, it may be better to ensure that dividends can be paid from one company to another, either directly with the second company as a shareholder or indirectly using a trust.
Business owner takeaways
Shareholder loans should usually be temporary as opposed to permanent. They can have unexpected tax implications, so proper planning is key.
Owner-managers should discuss shareholder loans with their tax accountant with a proactive planning-first approach rather than after year-end when filing their tax return.
ISLAMABAD, Jan 7 (Reuters) – The air force chiefs of Pakistan and Bangladesh held talks on a potential pact covering the sale of JF-17 Thunder fighter jets to Dhaka, Pakistan’s military said, as Islamabad widens its arms supply ambitions and beefs up ties with Bangladesh.
The talks in Islamabad come as Pakistan looks to capitalise on the success of its air force in the conflict with arch-foe India in May last year, the worst fighting in nearly three decades between the nuclear-armed neighbours.
Pakistan’s Air Chief Marshal Zaheer Ahmed Baber Sidhu and Bangladesh counterpart Hasan Mahmood Khan had detailed talks on procurement of the JF-17 Thunder, a multi-role combat aircraft jointly developed with China, the military’s press wing said.
Pakistan has also assured Bangladesh of the “fast-tracked delivery of Super Mushshak trainer aircraft, along with a complete training and long-term support ecosystem,” it added in Tuesday’s statement.
The talks signal improving ties as the South Asian nations have grown closer since massive protests in August 2024 drove then-Prime Minister Sheikh Hasina to flee to India, shattering Dhaka’s relationship with New Delhi.
“The visit underscored the strong historical ties between Pakistan and Bangladesh and reflected a shared resolve to deepen defence cooperation and build a long-term strategic partnership,” the military said.
In the wake of Hasina’s ouster, Islamabad and Dhaka have resumed direct trade for the first time since the 1971 war that brought independence for Bangladesh, while their military officials have held several meetings.
Under an interim administration led by Nobel laureate Muhammad Yunus, Bangladesh is set for general elections on February 12 that could lead to a significant government role for a once-banned Bangladeshi Islamist party with links to Pakistan.
The JF-17s have become the cornerstone of the Pakistani military’s weapons development program, figuring in a deal with Azerbaijan and a $4-billion weapons pact with the Libyan National Army.
On Tuesday, Pakistan’s defence minister said the success of its weapons industry could transform the country’s economic outlook.
“Our aircraft have been tested, and we are receiving so many orders that Pakistan may not need the International Monetary Fund in six months,” Khawaja Asif told broadcaster Geo News.
(Reporting by Saad Sayeed and Mubasher Bukhari; Editing by Clarence Fernandez)
NEW YORK (Reuters) -Rising living costs and expanding home ownership were among the issues U.S. President Donald Trump and top Wall Street executives discussed at Wednesday’s White House dinner, according to two people with knowledge of the event.
The gathering, largely of CEOs, included JPMorgan Chase’s Jamie Dimon, Nasdaq’s Adena Friedman, Morgan Stanley’s Ted Pick and Goldman Sachs’ David Solomon, according to three sources.
They also exchanged ideas around trading and market reforms and immigration, one source said.
A White House official did not immediately respond to a request for comment.
Trump, who gave a speech at the dinner, has focused on the cost of living after a string of defeats for Republican candidates in last week’s elections, while insisting that any higher costs were triggered by former President Joe Biden’s policies. Democratic wins in New Jersey, New York and Virginia revealed voters’ concerns over ongoing inflation, which economists say has been fueled in part by high import tariffs imposed by Trump.
The guest list also included Intercontinental Exchange CEO Jeffrey Sprecher, New York Stock Exchange President Lynn Martin, Pershing Square founder and CEO Bill Ackman, according to company representatives.
Mortgages and affordability have been hot topics for the administration in recent days. It has pledged to contain long-term U.S. Treasury yields, which help set lending rates.
Benchmark 10-year yields have declined nearly 50 basis points so far this year, partly due to slower economic growth and fiscal and debt management policies that have eased bond investors’ most pressing concerns about the ballooning U.S. government debt.
“Lower Treasury borrowing costs mean lower corporate borrowing costs, lower mortgage rates, and lower car payments—which all translates to greater affordability for all Americans,” Treasury Secretary Scott Bessent said in a speech at the Federal Reserve Bank of New York on Wednesday.
While the sources did not elaborate on the trading and market issues discussed, Nasdaq’s Friedman has advocated for market reforms including allowing public companies to report either quarterly or semiannually, a policy Trump has backed.
Trump has held other private meetings with business leaders in recent months as his administration seeks to promote economic growth while navigating tensions with global trading partners.
(Reporting by Nupur Anand and Saeed Azhar in New York; Additional reporting by Jarrett Renshaw, Anirban Sen, Tatiana Bautzer and Davide Barbuscia; Editing by Richard Chang)
WASHINGTON (Reuters) -White House economic adviser Kevin Hassett on Thursday said the Trump administration is weighing steps to address housing affordability, with advisers set to make recommendations “in the next few weeks to months.”
“The 50-year mortgage is something that’s on the table,” he told Fox News’ “America’s Newsroom” program. “The 50-year mortgage is just one of many, many policies that are currently being studied.”
(Reporting by Susan Heavey; Editing by Katharine Jackson)
The investment will help fuel the New York City-based company’s continued buildout, namely helping finance growth in its $1.2 billion dairy processing plant in Rome, New York, along with its $500 million expansion plans for its plant in Twin Falls, Idaho. The Rome plant is expected to spur 1,000 new jobs, while the Twin Falls expansion is expected to tack on about 160 new ones.
“This investment means more than just capital — it’s a testament to everything we’ve built,” Hamdi Ulukaya, Chobani’s founder and CEO, told DealBook, which noted that Chobani is on track to clinch $3.8 billion worth of sales this year, up 28 percent compared with last year.
The capital is a notable milestone for the New York City-based company that first opened its doors in 2005, after Ulukaya took out an $800,000 loan from the Small Business Administration. He used the capital to buy an old Kraft factory, which he then fashioned into what would become the company’s first plant dedicated to churning out a thick Greek yogurt packed with protein. Within three years, Chobani became the top yogurt seller in the U.S.
And it’s grown even more since then, now offering creamers and milks—dairy and otherwise—beyond just Greek yogurt. Along the way, Chobani has gone on an acquisition spree as well. It picked up popular coffee maker La Colombe for $900 million in December 2023 and Daily Harvest, well-known for its plant-based frozen smoothies, for an undisclosed amount in May.
Representatives for Chobani did not immediately respond to Inc.’s request for comment.
(Reuters) -U.S. President Donald Trump’s administration is mulling options to sell off parts of the federal government’s $1.6 trillion student loan portfolio to the private market, Politico reported on Tuesday, citing three people familiar with the matter.
Reuters could not immediately verify the report.
(Reporting by Yazhini MV in Bengaluru; Editing by Aidan Lewis)
Nearly half (46%) of Gen Z between the ages of 18 and 27 depend on financial assistance from their family, according to a 2024 report from Bank of America.
What’s more, even though some parents are willing to help their kids out with cash, those loans don’t always come without strings attached — sometimes in the form of interest.
Financial media company MarketBeat.com‘s new report, which surveyed more than 3,000 parents, found that an increasing number are charging their adult children interest on family loans.
“The Bank of Mom and Dad has always been generous, but even generosity comes with boundaries,” says Matt Paulson, founder of MarketBeat.com. “What’s striking is that while most parents don’t expect repayment — and certainly not at commercial interest rates — inflation and rising costs are starting to reshape how families think about money.”
The average interest rate charged by parents was 5.1%, according to the data. That’s still well below the costs their children might incur elsewhere: The average personal loan rate is 12.49% for customers with a 700 FICO score, $5,000 loan amount and three-year repayment term, per Bankrate.
Only 15% of parents would be comfortable with lending their kids $5,000 or more at one time, according to MarketBeat’s research.
Family loan repayment terms can also vary significantly by location. The top five toughest state lenders based on the interest rates parents charge were Nebraska (6.8%), Oregon (6.8%), Mississippi (6.5%), Georgia (6.4%) and Arkansas (6.3%), the report found.
Parents in Delaware and Maine tended to be the most lenient when it came to charging their children interest on loans, with 2% and 4% rates, respectively, according to the findings.
Many parents who expect repayment also have a fast-tracked timeline in mind. Twenty-one percent anticipated seeing their loan repaid in one month, 15% within one year and just 8% more than a year later, per the survey.
Although 59% of parents reported being happy to help their kids with money, 27% said they would only do it if necessary, and 4% admitted to feeling resentful.
In many cases, family loans don’t just provide financial support — they’re also “emotional transactions that test trust, responsibility and family dynamics,” Paulson notes.
Nearly half (46%) of Gen Z between the ages of 18 and 27 depend on financial assistance from their family, according to a 2024 report from Bank of America.
What’s more, even though some parents are willing to help their kids out with cash, those loans don’t always come without strings attached — sometimes in the form of interest.
The reality is that more and more Canadians are falling behind on credit payments. Thanks to the spike in inflation that occurred after the pandemic lockdowns were lifted, the cost of living across the country has ballooned. And credit card interest rates? They’re sitting at around 20% or more, which means even a small balance can turn into a monster rather quickly. In a recent Ratehub.ca survey, 50% of respondents said they had taken out a loan (student, auto or personal), and 41% carried debt over $1,000. (Ratehub.ca and MoneySense.ca are both owned by Ratehub Inc.)
Even if you keep up with your minimum monthly payments, credit card interest charges will eat into your progress; it’s like financial quicksand. But here’s the good news: you don’t need a perfect score to start turning things around. In this article, we’ll cover different options to get back on track, including debt consolidation, low-interest credit cards, and more.
Consolidating debts can mean lower interest fees
For some Canadians who are struggling to repay multiple debts, a debt consolidation loan may be the most optimal solution. With one loan, you can pay off those credit cards, swap your 20%-plus interest rate for something much lower, and then focus on making one predictable monthly payment. Throw in the occasional extra payment when you have a bit more cash, and you can really start to chip away at that debt mountain.
The “secret sauce” here isn’t just getting the loan—it’s picking the right one, with the right terms, and then paying it back consistently. A debt consolidation loan can be very effective for Canadians who want to stop drowning in debt AND boost their credit score. Read on for more details, plus other options to consider.
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Why does “bad credit” carry so much shame?
Many Canadians are uncomfortable talking about money and finances in general, let alone debt and bad credit.
Having bad credit or being in debt often carries a negative stigma, which can lead to feelings of shame. Because of this, people may avoid seeking help when their debt grows and spirals out of control. When this happens, people may turn to payday loans or other kinds of predatory lending with sky-high interest rates, which only makes things worse.
If you’re struggling with debt, you’re not alone. As of the second quarter of 2025, the average non-mortgage debt per Canadian consumer was $22,147, according to credit bureau Equifax Canada.
Bad credit and debt can make us feel like we are not in control of our lives—they can feel like a crushing weight on our chest that gets heavier with each passing day. While that shame can become unbearable, I’m here to tell you that there is a legitimate financial tool that can help you improve your debt situation and your credit score in one shot.
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Can borrowing actually be part of the solution?
It seems counterintuitive, doesn’t it? Taking on more debt to pay off your older debt? You’re not wrong, but when done correctly, debt consolidation loans can achieve the goals I mentioned earlier: paying down your debt while also improving your credit score. Still don’t believe me? Here’s how it works.
What is a debt consolidation loan?
In Canada, a debt consolidation loan is a personal loan you can take to combine your debts into one payment. Ideally, this will allow you to eliminate your high-interest debt in exchange for a single monthly payment with a lower interest rate. Instead of worrying about paying off a credit card, a student loan, and a car loan, you will only need to repay the debt consolidation loan.
This can simplify your financial situation and streamline your debt, with the bonus of saving you money with a lower interest rate. Most Canadian financial institutions can provide a debt consolidation loan, including banks, credit unions, and even online lenders.
How can a debt consolidation loan help rebuild your credit score?
Lower debt ratio: Your debt ratio is the amount of debt you carry compared to the amount of credit you have access to. This is a critical factor in determining your credit score.
Manageable payments: With a debt consolidation loan, you make one monthly payment, rather than juggling multiple payments for different debts. This can help you to budget your money and maybe even pay down your debt faster.
Pre-determined payment schedule: Debt consolidation loans also come with a clear fixed term and payment schedule. This allows you to have an end date in mind for paying off all of your debts.
Diversified credit mix: Interestingly enough, lenders like to see that people can handle different types of credit and manage them well. This can help improve your credit score.
Demonstrating responsible debt repayment: This is probably one of the biggest ways in which debt consolidation can improve your credit score. Consistently making payments on time shows that you’re reliable, and it can help give you a track record for future loan applications.
Who a consolidation loan isn’t right for
I’ve talked a lot about debt consolidation loans being an excellent way to pay down your debt and improve your financial situation. But sometimes, even a consolidation loan isn’t enough to help someone get their debt under control. Here are a few examples of people who shouldn’t consider a consolidation loan:
Those who are unwilling to change their spending habits
People who continue to go into debt without a plan to repay it
People who don’t have enough steady income to keep up with payments
How to get a debt consolidation loan in Canada
Application process: Most financial institutions have their own application process and approval criteria. A basic credit check is also standard to qualify for these loans.
Documents required: Generally, you will need to provide financial documentation including proof of income or recent pay stubs, income tax returns, and a list of current debts and assets.
Who qualifies? This will vary by institution. Generally, lenders look for steady income.
Debt types covered: These loans cover most types of unsecured debt, meaning those without collateral. These can include credit card debt, personal loans, and some lines of credit.
Other options to consider
If a debt consolidation loan isn’t a good fit for your financial situation, you may want to consider other options:
Low-interest credit card: Lower interest rates can help reduce the amount of debt you accumulate.
Balance transfer credit card: This type of card offers a lower interest rate for debt transferred from one or more higher-interest cards. Some offer a limited-time promotional period with an extra-low interest rate, even 0%.
Line of credit: A personal line of credit from a bank or other financial institution lets you borrow money up to a pre-set limit, at an interest rate lower than a typical credit card. The interest rate is usually variable, and there is no repayment schedule, aside from monthly interest payments.
Home equity line of credit (HELOC): This is a type of line of credit that is secured by your home, meaning your home is the collateral for the money you borrow. Like personal lines of credit, most HELOCs have no repayment schedule, besides monthly interest payments. Learn more about HELOCs.
Various saving methods: Anything you can do to reduce your debt and improve your earnings and savings. Cut spending or subscriptions, or take on a side hustle.
Canada’s best credit cards for balance transfers
My final thoughts
Debt is a scary thing, and things are made worse by the stigma that surrounds it. If you find yourself in debt, you need to take immediate action before that snowball gets too big to handle. A debt consolidation loan is a financial tool that can help make it easier to manage your debt.
If you are in debt, it’s not too late to change. Create and stick to a budget. Look for ways to reduce spending and earn more income.
You do not need to let debt define who you are. Use the tools available to take back control. If you’re serious about paying down your debt and rebuilding your credit, a consolidation loan might be the smartest money move you make this year.
Changes to the BoC rate impacts the prime rate set by Canadian lenders, which in turn affects the pricing of variable-based borrowing products, which are based on the prime rate plus or minus a percentage. Following this most recent cut, the prime rate at most Canadian lenders will drop to 5.95% from 6.45%. What does that mean to your money and your debt? Keep reading.
The BoC is taking action with this larger-than-usual cut
When the central bank lowers its benchmark rate, it typically does so in quarter-point increments —unless there’s an economic reason for a heftier cut. Half-percentage point decreases like today’s are rare, but they do have a precedent; the last time the BoC doled out cuts of this size was back in March 2020, when it implemented three in rapid succession to support the economy amid the onset of the COVID-19 pandemic. Outside of the COVID era, today’s rate cut is the largest since March 2009.
That the BoC is once again supersizing its cuts points to concerns that the economy is slowing at a faster pace than expected. The most recent inflation report for September from Statistics Canada revealed the year-over-year inflation as measured by the Consumer Price Index (CPI) fell to 1.6%, which is below the BoC’s 2% target. That’s considered sustainable for the Canadian economy. The BoC tweaks its benchmark rate to keep it as close as possible to target. When inflation is running hot, it hikes rates to cool consumer spending and access to credit. The opposite occurs when inflation gets too soft; the BoC must ease borrowing conditions to encourage consumption, and bolster economic growth, otherwise it risks an impending recession. We’re in the latter situation right now.
Will the BoC continue to drop its rate?
Should economic data, such as inflation, GDP, and job market numbers, continue to trend as it has, additional rate cuts are a certainty, including more supersized cuts. Much will hinge on the next CPI report, due out on November 19. Should inflation remain sluggish, that increases the chances of another half-point cut in the BoC’s next rate announcement, on December 11.
The BoC is also keen to lower its rate down to “neutral” state, which is a range between 2.25% to 3.25%. This again is a rate that neither inflames or stunts economic growth, and remaining above it too long poses economic risk.
Following this rate cut today, the overnight lending rate remains 0.50% above the higher end of the neutral range. Overall, analysts think the BoC will lower its rate by another 1.75% by the end of 2025.
What does the BoC rate announcement mean to you?
What does it mean for you, your home, your finances and more? Read on.
The impact on Canadians with a mortgage
Whether you’re shopping for a brand new mortgage rate or renewing your existing term, today’s rate cut will make it slightly more affordable to do so.
The impact on variable-rate mortgages
Variable mortgage rate holders are the most heavily impacted by the October rate cut, as their mortgage payments—or the portion of their payment that services interest—will immediately decrease along with their lenders’ prime rate. These borrowers in Canada also have much to look forward to, with anticipated rate cuts on the horizon.
The half-percentage point interest rate cut marks the fourth consecutive reduction since June and brings the central bank’s policy interest rate down to 3.75 per cent.
With annual price growth now around 2%, governor Tiff Macklem said the Bank of Canada’s job has shifted from lowering inflation to maintaining it around the inflation target.
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“We took a bigger step today because inflation is now back to the two per cent target and we want to keep it close to the target,” Macklem said in his opening statement.
“High inflation and interest rates have been a heavy burden for Canadians. With inflation now back to target and interest rates continuing to come down, families, businesses and communities should feel some relief,” he went on to say.
Canada’s inflation rate fell to 1.6% in September, solidifying forecasters’ expectations for a larger rate cut. Bigger cuts mean the rate can be lowered faster.
“The recent data has allowed the Bank of Canada to more decisively plant the victory flag in its battle to get inflation to its two per cent target on a sustainable basis,” wrote CIBC chief economist Avery Shenfeld in a client note.
The governor said the central bank expects it will lower the interest rate further—so long as the economy evolves in line with its forecast— but he stopped short of saying whether the he expects another half-point cut is likely in December.
“I’m not going to handicap the next move,” Macklem said. “I think we’ve been pretty clear on the direction. And I think we’ve been pretty clear that the timing and the pace is going to depend on how the data evolves.”
The Florida Realtors Relief Fund is offering $500,000 to help hurricane victims.
The National Association of Realtors‘ Realtors Relief Foundation announced a $500,000 grant to Florida Realtors to help Floridians with housing issues resulting from Hurricanes Milton and Helene.
“So many people are struggling from the devastation caused by Hurricanes Milton and Helene in communities across our state,” says 2024 Florida Realtors® President Gia Arvin, broker-owner with Matchmaker Realty in Gainesville. “The crucial first step is often dealing with housing needs. Thanks to the National Association of Realtors’ (NAR) Realtors Relief Foundation and their generous donation to help Florida residents in the wake of these hurricanes, people can find the housing assistance they need to rebuild their homes and their lives.”
As a result, Florida Realtors is handling two charitable relief programs: its Disaster Relief Fund that focuses on housing challenges within the Realtor family after a natural disaster, and these grants through NAR’s Realtors Relief Foundation funding that offers money to any Floridian impacted by the storms and facing-housing related needs. Check online for more information or to apply for RFF assistance.
Qualifications for NAR-funded assistance through the Realtors Relief Foundation:
Monthly mortgage expense for the primary residence that was damaged during Hurricane Helene and/or Hurricane Milton in September/October 2024; or
Rental cost due to displacement from the primary residence resulting from Hurricane Helene and/or Hurricane Milton in September/October 2024.
Submit only one application if you were impacted by Hurricane Milton and Hurricane Helene.
Maximum grant amount per household is $1,000.
RRF applications for Hurricane Helene and Hurricane Milton close April 2, 2025. Recipients must be full-time Florida residents and citizens of the United States, or legally admitted for residence in the U.S.
This assistance is for housing relief only; other expenses including second mortgages (home equity lines or loans), clothing, appliances, equipment, and vehicles (purchase, rental or repair and/or mileage) are ineligible for reimbursement under this program.
Type of assistance offered to qualified applicants:
Monthly mortgage expense for the primary residence that was damaged during Hurricane Helene and/or Hurricane Milton in September/October 2024; or
Rental cost due to displacement from the primary residence resulting from Hurricane Helene and/or Hurricane Milton in September/October 2024. Relief assistance is limited to a maximum of $1,000 per household.
All grants are contingent upon the availability of funds. As a result, aid will be provided on a first-come, first-serve basis.
For more info, including how to apply and the applications for assistance, go to the Florida Realtors website.
It’s important to review your credit report and score at least once a year, especially when you’re trying to improve it. You can obtain your credit report and score through Canada’s two credit bureaus, a third-party service or your bank’s website or mobile app, as noted above. Doing so will not affect your score.
Look over the report to see what’s documented and ensure the information is correct. You can remove incorrect information at no charge by filing a dispute directly with the credit bureaus. Errors in your report or instances of identity theft can cause your score to be lower than it should be and addressing these errors could increase it dramatically. Look for things like:
Errors related to personal details such as phone number, reported addresses, birth date and full name
Incorrect accounts due to identity theft
Balances on accounts that have been paid off
Unauthorized purchases due to fraud
It can take time for errors to completely disappear from your credit report, so the sooner you address the issue, the sooner you can start the process of rebuilding your credit.
Even if there are no mistakes, the report provides an overview of your accounts, offering insights into how to enhance your credit and better manage debt.
2. Focus on paying down debt
A history of consistently paying down debts is a good starting point for improving your credit, and it’s something you can immediately take action on. Even if you only have one big bill, it’s important to prioritize paying it down. Paying at least the required miniumum amount, on-time, every time, is crucial for your credit score. And remember that carrying debt is expensive, so you’ll want to try to pay off these debts in full as soon as possible by putting more money towards the outstanding balances.
You can do this by creating a debt repayment plan using either the avalanche or the snowball repayment methods. Avalanche focuses on paying off the debt with the highest interest rate first. By prioritizing high-interest debt, you save money in the long run and can pay off your debts more efficiently. The Snowball method has you pay off the smallest debt first, which can provide quick wins and keep you motivated with each debt that gets knocked out. Each method has its pros and cons, so pick the one that best fits your financial situation.
3. Watch out for credit repair scams
Some companies claim they can fix your credit and solve your debt problems quickly—and you may be tempted to use their services if you have a less-than-perfect credit score. However, you can only rebuild credit—there’s no quick fix.
Credit repair companies may say they will fix your credit by removing negative information from your credit report to boost your credit score—for a costly, up-front fee. These companies often take advantage of the fact that many Canadians don’t know you accurate information cannot be removed from a credit report—even if it’s bad. Be cautious of companies offering credit repair services. It’s likely a scam if a company:
Well, you apply. But make sure you’re applying for the right card and that you have a high chance of being approved. You see, the credit card company will check your credit history, and that can affect your current credit score. So, don’t apply for a bunch and hope for the best, as that could make it look like you are at risk for having access to too much credit. The good news: There are many types of credit cards in Canada, including those for newcomers to Canada, students and even those with bad or no credit. Check out our rankings for the best credit cards in Canada for your situation.
Once you have a credit card you will want to maintain good credit habits, like paying it off on time and paying more than the required minimum payment. Here are some other articles that will help you navigating your first credit card in Canada.
Read:
Why is credit history important?
Say you want to rent an apartment. Your credit history is vital because most landlords will want to see your credit score and credit report to judge whether you’ll pay your rent on time. If you get the apartment, you’ll want an internet connection—and for this, too, the large providers will query your credit score.
If you need to buy or lease a car, your credit history will not only determine whether you’re approved for a loan, but also what interest rate you’re offered: the higher your credit score, the lower the interest rate. Insurance companies may check your credit history before providing coverage. And finally, if you want to buy a home, your credit history is key to qualifying for a mortgage, as well as what mortgage interest rates lenders will offer. A lower rate could save you tens of thousands of dollars over the life of your mortgage.
Read:
How to build a good credit history when you have no credit history
Credit history is usually built organically as people start using credit. In Canada, young people who have reached the age of majority (18 or 19, depending on where they live) can apply for a credit card and start building a history of borrowing and repayment.
If you’re a newcomer to Canada, or if you’re a student, recent grad or young adult who doesn’t have much of a credit history, your credit score may be low—which is a hurdle in getting approved for credit. It’s a frustrating cycle—you need credit history to access credit, and you need credit to build that history. So, what’s the solution? Here are a few steps anybody can take to build their credit history:
With a personal loan, you borrow a single (fixed) amount of money from a bank or other lender. In return, you agree to pay back the principal plus interest over a certain period of time. This is called “installment credit.” Often, personal loans are for specific expenses. For example, you might apply for a car loan to buy a vehicle, or a debt consolidation loan to reduce your debt. Personal loans can be secured with collateral or unsecured, and the amount you’re eligible to receive is tied to your credit history and financial picture.
When you’re approved for a line of credit, the bank, firm or lender extends a certain amount and you can borrow on an as-needed basis. Whatever you pay back, you can access the credit again, just like with a credit card. This is called “revolving credit.” You can use the money for any purpose you wish. Just like with loans, lines of credit can be secured or unsecured.
Here are the key differences at-a-glance.
Personal loan
Line of credit
Type of credit
Installment (non-revolving)
Revolving
Payment schedule
A fixed amount over a fixed time period.
As-needed, with a minimum monthly payment if you borrow
Interest rates
Fixed or variable
Usually variable, and tied to the Prime Rate (which is currently 6.45%.)
Interest applicability
On the whole loan
Only on what you borrow
Extra fees
Transaction or service fees
Transaction or service fees
Uses
A need specified when applying
Any purpose, no need to reveal
Pros and cons of a personal loan
Here are the pros and cons for personal loans.
Pros
Interest rates can be lower than with credit cards
The fixed payment schedule ensures your loan will be repaid by a certain date.
Cons
Typically higher interest rates than the majority of lines of credit.
To use more credit you have to refinance the loan or get a separate loan.
Lenders may charge fees for administering the loan.
There might be limitations on what you can spend the money on. A car loan is only for the purchase of a vehicle, which may seem obvious, but other loans may only be used for renovations or debt consolidation.
Pros and cons of a line of credit
Here are the pros and cons for lines of credit.
Pros
Typically have lower interest rates than personal loans.
Interest is only charged on the portion of credit used.
There is no fixed term so you can pay it off at any time without penalty (as long as you pay the minimum monthly amount).
The credit is “revolving”, meaning that once you pay it back you can borrow again without refinancing.
You can use the money for any purpose.
Cons
Interest rates are variable, based on the prime rate, so the loan rate will fluctuate. For example, you might have a line of credit where the interest rate is prime + 1.5%. As the prime rate changes, so will the total interest on your line of credit.
Lenders often offer the maximum amount which can make it easy to overborrow.
As there is no fixed payment schedule, you must manage repayment on your own.
A secured line of credit against your home (like a HELOC) will require a one-time appraisal as well as legal fees.
How interest rates work for loans and lines of credit
The interest you pay on a personal loan or a line of credit will depend on many factors including the lender, your credit history, the terms of the credit and the prime rate (in the case of variable interest). That said, these are the variables you can negotiate to get the best rates.
For a personal loan:
Interest rate Look for the lowest rate available to you, and decide whether you prefer a fixed or variable rate.
Fixed or variable rate Loans most often incur a fixed rate, meaning that the interest is the same throughout the term of the loan. With a variable-rate loan, the interest rate will change in the same direction as the prime rate.
Secured or unsecured You might negotiate a lower interest rate if you can secure the loan with collateral, such as a home.
Amortization period Amortization is the amount of time you take to pay off the loan and can range from six months to 60 months (five years) for personal loans, reports the Financial Consumer Agency of Canada. Adjusting your amortization period might affect your interest rate.
Fees or penalties Loans come with fees. With personal loans, for example, you may pay a penalty if you pay it off early.
Borrowing to invest can be risky. It can magnify your returns, as well as your losses. The best candidate for leveraged investing is someone with a high risk tolerance, a long time horizon and low investment fees.
Leveraged investing for the short term can be risky, because stock prices can fall several years in a row, even if they rise most of the time.
If you’re a balanced investor buying stocks and bonds, particularly if you pay high investment fees, it can be hard to earn a profit over and above the interest costs.
When you borrow money to invest in stocks, you can deduct the interest on line 22100 of your personal T1 tax return. You can also deduct other expenses or carrying charges on this line, such as fees for investment management or for certain investment advice, or accounting fees if you have income from a business or property.
If your investments produce only capital gains, you cannot deduct your interest. If you are in Quebec, you may be limited provincially from deducting interest that exceeds your investment income for the year.
What is a HELOC?
HELOC stands for home equity line of credit, a type of loan secured by your home—meaning that your home is collateral for the loan. HELOCs provide revolving credit, so you can borrow money as you need it, up to a certain amount—usually a percentage of the value of your home. Most HELOCS have no fixed repayment schedule, although you will have to pay interest monthly. In contrast, a home equity loan is a lump sum with a fixed repayment schedule for the full amount.
Read the full definition in the MoneySense Glossary: What is a HELOC?
HELOC vs. mortgage
You mentioned you borrowed using a home equity line of credit (HELOC), Jackie. Most HELOCs have interest-only payments, so that ensures your payments are all tax-deductible when you borrow to invest in eligible investments. However, HELOCs tend to have higher interest rates than mortgages.
A typical HELOC rate is the prime rate, plus 0.5% or 1%, whereas a variable-rate mortgage may have a discount to the prime rate of 0.5% to 1%. It may make sense to consider converting a tax-deductible HELOC to a mortgage to reduce your cost of borrowing. This would increase your payments, since mortgage payments include principal and interest, so it might slightly increase your cash-flow requirement. However, paying lower interest may make the leverage more beneficial overall.
Can you port a HELOC?
If you are moving to a new home that you are buying, Jackie, you could consider porting your HELOC to the new property. This way, the debt can be preserved, as well as the tax deductibility.
In announcing the rate cut Wednesday, Bank of Canada governor Tiff Macklem said if inflation continues to ease broadly in line with the bank’s July forecast, it is reasonable to expect further cuts in the policy rate.
Julie Leduc, a mortgage broker at Mortgage Brokers Ottawa, said clients with variable-rate loans were not happy when rates were rising, but the cycle is turning.
“We’ve lived the worst of it, we’re on our way out,” she said.
“So let’s look for the benefits and the benefit is, if they go variable and the rates go down, they’re going to live the benefit.”
Right now, the rates offered to those looking for a new variable-rate mortgage or needing to renew are higher than those being offered for five-year fixed rate mortgages, something that Leduc called an anomaly.
That’s because the expectations are that the Bank of Canada will continue to cut interest rates, lowering the amount charged to borrowers in the future. If something unexpected happens and the central bank doesn’t cut rates, then the rates charged on variable-rate mortgages won’t go down.
What to expect if you’re mortgage holder
But if things continue to roll out as expected, those choosing variable-rate loans will see the amount they are charged go down. Just how much and how quickly will depend on the central bank.
Sojonky says the discounts lenders offer to the prime rate for variable-rate mortgages are also improving.
The immediate impact of today’s rate cut will be interest rate relief for Canadians.
As a result of today’s rate cut, most Canadian lenders will now lower their prime rates to 6.45%, from the previous 6.7%. This in turn will cause variable-rate borrowing products, including variable-rate mortgages, to also drop, as their pricing is based on prime plus or minus a percentage. Those with home equity lines of credit (HELOCs) will also see their interest rates decrease.
Will the BoC continue to drop its rate?
Today’s quarter-point cut was widely anticipated. In fact, markets had priced in a 100% chance that it would occur. The deal for the rate cut was sealed after the latest inflation numbers trended in the direction the BoC wants: down between 2% and 3%. The July Consumer Price Index (CPI) report revealed inflation fell to 2.5%.
“As expected, inflation slowed further to 2.5% in July. The Bank’s preferred measures of core inflation averaged around 2.5% and the share of components of the consumer price index growing above 3% is roughly at its historical norm,” wrote the BoC’s Governing Council—the body that makes the central bank’s interest rate decisions—in its announcement.
The BoC also pointed out that shelter inflation—the largest contributor to the CPI—is also starting to slow. This includes mortgage interest costs (MIC), which measures the amount of interest Canadians pay on their mortgages. As a result of the previous two rate cuts, MIC dropped to 21% from 22.3% in July. That’s great news. but it also reflects just how much mortgage costs have soared for Canadians since the start of the pandemic.
In addition to inflation, the BoC also stated that recently revealed second quarter gross domestic product (GDP) numbers indicate the economy slowed in June and July. This suggests further rate cuts are to come; in fact, it’s expected the BoC will dole out two more quarter-point cuts in its October and December announcements this year, bringing the Overnight Lending Rate to 3.75%—its lowest since December 2022.
The prognosis is also looking good for 2025, should economic trends continue as the BoC expects. And we could be in store for another four cuts, totalling 1%, by the end of next year, which would bring the benchmark rate to 2.75%. That would be a low not seen since September of 2022, when the BoC increased its rate from 2.5% straight to 3.75% as part of its aggressive hiking cycle.
What does the BoC rate announcement mean to you?
What does it mean for you, your home, your finances and more? Read on.
… if you’re a Canadian with a mortgage
Renewing or borrowing, this rate cut spells relief for Canadians.
The impact on variable-rate mortgages
Today’s rate cut is music to variable mortgage holders’ ears. Variable interest rates will lower to reflect the cut, and how borrowers will be impacted will depend on the type of variable mortgage they have. Those who hold adjustable-rate variable mortgages will see their monthly payment immediately lower, while those on a fixed payment schedule will see more of their payment going towards their principal mortgage balance.
If you loan money to a child, you can forgive the loan during your life or upon your death. Of course, you should only do so if you know you won’t need or want the money back in the future.
If you have loaned different amounts of money to your children, documenting the loans can help ensure an equal division of your estate. Some wills include a so-called “hotchpot” clause that accounts for all loans outstanding, so that one child does not receive a disproportionate gift or forgiven loan, as well as an equal share of the estate.
What are the tax implications of a gift or loan?
There are generally no tax implications to gifting in Canada. This differs from the U.S., which has a gift tax. U.S. citizens in Canada still need to be mindful of these U.S. implications. Only two situations may trigger additional income taxes for the parent: selling an asset at a capital gain or withdrawing an asset from a tax-sheltered account a registered retirement savings plan (RRSP). But gifting itself has no tax issues with adult children.
If a loan to your child was for investment or business purposes, forgiving it can have tax implications. This is in part because loan interest on funds borrowed to buy investments or fund a business is generally tax-deductible for the borrower.
As a result, forgiveness of such a loan may lead to a capital gain for the lender—if it’s forgiven during your life. If the loan is forgiven upon your death, there should generally be no tax implications.
If you loan money to a child to invest and the loan does not bear the Canada Revenue Agency prescribed rate of interest—currently 5%—the income may be attributed back to you and taxable to you. You can give an adult child money to invest and not be subject to attribution. But if you loan it and can call it back without charging the prescribed rate, the CRA will attribute interest, dividends, rental income and business income back to you. Capital gains, however, are taxable to the child.
Before you loan or gift money for a down payment…
When considering a gift or loan, you should first and foremost be sure that you are in a position to help your kids without risking your own financial security.
There may be family law, estate and tax implications to making a loan. Seek legal and tax advice from a qualified professional to protect yourself and your family.
