In case you haven’t noticed CD rates already started moving higher this past year and will continue to do so in 2017. The rate changes in 2016 have been minimal but at least CD rates are moving higher. At the beginning of 2016 the highest CD rates on 1 year certificates of deposit were around 1.10 percent, now the highest 1 year rates are at 1.30 percent.
How much higher CD rates move this year and next will depend on when The Federal Open Market Committee hikes the federal funds rate. The FOMC has two more meetings scheduled for 2016 and any rate hikes will come after a meeting.
You can check on current bank CD rates by searching our rate database at MonitorBankRates.com.
The first meeting is just before the November Election and the last meeting of 2016 is in mid December. We won’t anticipate the FOMC to hike the rate just before the election but probably will during the December meeting. If the FOMC does hike the rate we look for a 25 basis point hike.
A 0.25 percent rate hike will send the best 1 year CD rates higher and towards 1.50 percent. Not all banks will increase their rates but the bank’s already offering the top rates probably will. These national online banks vie for the top spot on the rate lists and they will continue to want to be on the top.
Looking beyond 2016 the FOMC is expected to increase the fed funds rate two or three times in 2017. Of course a lot will depend on how strong economic growth is, how high the inflation rate is and how many jobs are created. The FOMC also looks at wage ilfation to help them determine whether or not a hike rates at any given time.
Two or three rate hikes in 2017 will put the fed funds rate between 1.25 percent and 1.50 percent. If these hikes do happen, we look for the best 1 year CD rates to move above 2.00 percent and possibly as high as 2.50 percent. The last time 1 year CD rates were that high was during the financial crisis almost a decade ago.
If you haven’t been following the Fed news on interest rates recently, the new Fed Chairperson, Janet Yellen, held her first press conference last week after the Fed’s March meeting. Yellen might have slipped up when she spoke about when the fed funds rate would be increased and in doing so, spooked the markets.
Until Janet Yellen spoke last week, the general consensus was the Federal Open Market Committee (FOMC) would vote to increase the fed funds rate in the summer of 2015. In last week’s press conference, Yellen mentioned that it might be time to increase the fed funds rate six months after the Fed stopped quantitative easing (QE).
The current round of QE, buying long term bonds and mortgage-backed securities, is expected to end the fall of 2014. This would put a possible fed funds rate increase in the spring of 2015, sooner than the markets expected. Whether or not this all plays out remains to be seen but higher CD rates won’t come until the fed funds rate is increased.
The last time the fed funds rate was increased was almost 8 years ago when the rate was increased 0.25 percent to 5.25 percent. The last time the FOMC made any change to the fed funds rate was in December 2008 when the rate was lowered to a targeted range of zero percent to one quarter percent. You can view a historical chart of the fed funds rate here: Federal Funds Rate Historical Chart.
Over the past 8 years financial institutions have lowered CD rates, savings account rates, and all deposit rates down to record lows. The current average 1 year CD rate this week is at 0.80 percent. Going out farther on the yield curve doesn’t get a much better return. The current average 5 year CD rate this week is at 1.55 percent, only 75 basis points higher than 1 year rates.
Average CD rates are just averages, there are many banks and credit unions offering CD interest rates much higher than the averages. The best CD rates in our database of 1 year certificates of deposit this week are at 1.04 percent with an APY of 1.05 percent. The highest CD rates in our 5 year CD rate database are at 2.23 percent with an APY of 2.25 percent.
Since CD rates at banks and credit unions are poised to move higher sometime in 2015, make sure you don’t lock into a long term CD account in 2014. Make especially sure this doesn’t happen with your certificate of deposit accounts that have terms of more than 1 year that are maturing in 2014. Banks and credit unions will automatically roll the account over into a new CD with the same term. You don’t want to lock into a 5 year CD account that is earning around 2.00 percent because by the end of 2015, rates will be higher. By the end of next year 1 year CD rates will probably be around 2.00 percent.
The Federal Open Market Committee (FOMC) meets this week to decide monetary policy and the direction of interest rates. There is zero chance the FOMC will increase the federal funds rate but they will continue paring back their purchases of long term U.S. bonds and mortgage-backed securities (MBS).
What is means for CD rates, savings account rates, and money market rates is more of what we have seen the past 5 years – low rates. On the other hand, lowering their purchases of long term bonds and MBS will eventually send mortgage rates higher. We won’t see higher CD rates and deposit rates until the Fed increases the fed funds rate, which isn’t expected to happen until 2015.
Short Term Average CD Rates Mixed This Week
Shorter term average CD rates were mixed this week over last as some banks increased their rates by small margins. Current 3 month CD rates are averaging 0.23 percent, up from last week’s average 3 month rate of 0.22 percent. 6 month CD rates at banks averaged 0.52 percent, down 0.01 percent from last week’s average 6 month rate.
While average rates were mixed, the best CD rates on short term certificates of deposit were unchanged as no banks in our database increased their rates. The best 3 month CD rate remains at 0.45 percent and the best 6 month rate remains at 1.00 percent. Zions Direct’s 6 month rate is the best bang for your buck right now since most banks are offering 1 year rates lower than 1.00 percent.
Intermediate Term CD Rates Higher on Average
Rates on intermediate term certificates of deposit were higher this week over last. 1 year CD rates this week are averaging 0.75 percent, up 1 basis point from last week’s average 1 year rate. Average 2 year CD rates were also higher this week averaging 0.96 percent, up from last week’s average 2 year rate of 0.93 percent.
As with short term rates, the best CD rates on intermediate term certificates of deposit are unchanged this week. The best 1 year bank CD rate this week remains at 1.09 percent with an APY of 1.10 percent. The best 2 year rate on our table is from a credit union at 1.40 percent with an APY of 1.41 percent.
Long Term Average 5 CD Rates Unchanged
Long term average 5 year rates are at 1.50 percent this week, unchanged from last week’s average 5 year rate. Though the average 5 year rate didn’t change this week, we have seen longer term rates move considerably higher the past 6 months as long term bond yields have risen.
The highest CD rates on 5 year certificates of deposit on our rate table are at 3.00 percent with an APY of 3.04 percent. This rate is almost double the average 5 year U.S. Treasury yield of 1.58 percent as of January 24, 2014.
Here is a quick rundown of the top CD rates for January 27, 2014.
Top 3 Month Bank CD Rates
6 Month Bank CD Rates
12 Month Bank CD Rates
2 Year Bank CD Rates
5 Year Bank CD Rates
Anyone who has invested in a certificate of deposit over the past 5 years knows how low CD rates have fallen. Ever since the financial crisis and Great Depression of 2007/2008, interest rates have been at record lows. The Federal Reserve Open Market Committee having kept their key benchmark interest rate, the federal funds rate, near zero percent is the reason why bank CD rates are so low.
All deposit rates have fallen to record lows due to the FOMC. Mortgage rates have also fallen to record lows over the past few years based on what the Fed is doing to drive interest rates lower. Mortgage rates have increased over the past several months but deposit rates have not.
CD Rates Remain Low While Mortgage Rates Move Higher
Since the beginning of 2013, long term fixed mortgage rates along with long term bond rates have risen over 1.00 percent. Since the start of the year, average CD rates at banks on both short term and long term certificates of deposit haven’t moved much at all. Right now the best CD rates on 1 year certificates of deposit are just above 1.00 percent, showing no change since the start of 2013.
The reason mortgage rates moved higher is long term bond rates moved higher and rates on mortgage loans are tied to long term bond rates. CD rates, savings rates, and all deposit rates haven’t budged because these rates are not affected by long term bond rates. Deposit rates are tied to the fed funds rate which the Fed hasn’t increased since December 2008.
Expect Higher CD Rates in 2014
After 5 years of record low CD rates, we will finally see rates move higher in 2014. The key thing to watch is the when the nation’s unemployment rate falls below 6.5 percent. In every statement that the FOMC has released for over 2 years, they have stated the plan to keep the fed funds rate near zero percent until the unemployment rate falls below 6.5 percent.
The current unemployment rate is at 7.2 percent so we are getting very close to a 6.5 percent rate. Until the government shutdown and possible debt default, it looked as if the unemployment rate might fall to 6.5 percent in the April 2014 employment report. Now that might have been delayed by a month or two.
I expect the Fed to start increasing the fed funds rate sometime in the summer of 2014. When the Fed starts tightening, the increases will come in .50 percent increments and will happen right after each Fed meeting. The Fed is scheduled to meet in June, July, September, October and December of 2014.
If the Fed increases the fed funds rate 50 basis points after each meeting, by the end of 2014 the fed funds rate will be in the 2.50 to 3.00 percent range. A fed funds rate in this range will drive 1 year CD rates to the 3.00 percent to 4.00 percent level.
Best CD Rates This Week
The best 1 year CD rates this week are at 1.04 percent with an APY of 1.05 percent. Since rates are poised to move higher in about 8 months, you can lock into a 1 year CD rate now and when it matures you’ll get a rate between 3.00 percent to 4.00 percent.
That being said, you should stay invested in CD terms of 1 year or less. The highest CD rates on 6 month certificates of deposits are exactly at 1.00 percent. The best 3 month CD rates this week are at 0.45 percent.
Current Ally Bank CD rates are not the highest CD rates available but this bank’s rates are still in the top 5 rates. Ally Bank’s CD rates on 1 year certificates of deposit are at 0.94 percent with an APY of 0.94 percent. The best 1 year certificate of deposit rate tables on MonitorBankRates.com are 10 basis points higher at 1.04 percent.
1 year CD rates at Ally Bank are also much higher than the current national average 1 year rate of 0.71 percent. You probably have heard of Ally Bank, formerly GMAC bank. The bank was rebranded in 2009 during the financial crisis. The bank also borrowed money from the TARP program and by this year has already paid back $6.1 billion. You can read more about Ally Bank’s history here: Ally’s History.
Ally Bank’s Health Rating
This year Ally Bank reached over 1 million customer deposit accounts, in all likelihood because they offer rates higher than what most other banks offer. The bank receives a 4 star rating from Bankrate.com. In addition to offering regular certificates of deposit with terms ranging between 3 months and 48 months, the bank also offers 4 year and 5 year jumbo certificates of deposit.
Ally’s Best CD Rates on Short Term Certificates of Deposit
The best CD rates right now for the CD terms from Ally is on their certificates of deposit of 1 year and less. 6 month CD rates are currently offered at 0.61 percent and current 3 month CD rates are currently at 0.30 percent. The current national average in the FDIC rate survey this week for 6 month CDs is at 0.12 percent an the average 3 month CD rate is at 0.08 percent.
Ally Bank Regular CD Rates
Ally Bank Jumbo CD Rates
We recently expanded our coverage on bank CD rates by offering a list of CD rates that are specific to a particular bank. Until now our rate listings are by product type but now you can see all the CD products and interest rates on those products on our new bank pages.
Here is an example: If you were looking for the best CD rates available on 1 year certificates of deposit. You can easily search our rate tables for a quick listing of rates on 1 year CD accounts for both national rates and regional rates. You can also search for regular, IRA and jumbo CD rates.
Let’s say you see a particular bank, like Discover Bank, is offering a really good rate on a 1 year CD so you want to see the bank’s other rates. Now you can just click on the bank name on Monitor Bank Rates and you will be taken to a complete list of Discover Bank’s CD rates.
Discover Bank has a large variety of CD products so on this page we have rates listed for regular CD accounts, jumbo CD accounts, IRA CD accounts and jumbo IRA CD accounts. To the right is a complete list of Discover Bank’s CD rates on regular CD accounts:
You can also compare each bank’s rates to other bank rates without ever leaving the page which makes your search for the best rates much easier.
Besides current listings of rates on the bank pages we also list current FDIC information on each bank. With is financial information you can quickly see the bank’s total assets, deposits and net income.
Below the bank’s rates we also list the most current articles that are related to the bank. Have a look at our new bank pages and let us know what you think by sending us a comment.
Since the beginning of May, average CD rates have remained pretty much where they are today. The best CD rates available from banks have also remained stable but during this time long term U.S. Treasury yields are soaring. Long term yields are moving higher due to stronger than expected economic data and fears that the Federal Reserve will stop purchasing long term Treasuries and mortgage-backed securities (quantitative easing).
The Federal Reserve has been making these purchases to force long term interest rates lower. The Fed’s plan has been effective at reinvigorating the economy and jump-starting the housing market recovery. Now that the Fed has almost achieved their goals, there is fear the Fed will stop their purchases.
Quantitative Easing Ending Will Eventually Force CD Rates Higher
Just the hint of the end of quantitative easing by the Fed is scaring the markets into selling bonds. When bond prices move lower, bond yields move higher. Since the beginning of May, yields on 5 year bonds are up about 30 basis points but the highest CD rates on 5 year certificates of deposit remain just under 1.75 percent. CD rates will move higher in sometime in the near future.
Highest 5 year CD rates at Banks this Week
Future Direction of CD Rates
Both long term and short term CD rates will remain low for the rest of 2013 and into 2014. Bank CD rates will finally move higher when the Federal Reserve Open Market Committee (FOMC) finally starts to increase the fed funds rate, their key interest rate. The current rate has been at near zero percent since December 2008.
The FOMC will increase the rate when the nation’s unemployment rate dips below 6.5 percent. The Committee has stated this in their statements and meeting minutes over the past year. The current unemployment rate is at 7.6 percent and the rate probably won’t dip below 6.5 percent until June 2014.
When the fed funds rate moves higher banks will quickly follow suit by increasing CD rates, savings rates, and money market rates. I believe the increase in rates will be rather quick so stay invested in shorter term certificates of deposit until mid 2014. When interest rates do move higher you can quickly invest in higher yielding accounts.
The best CD rates for the week ending April 30, 2013, are stable while the national average CD rates declined. This month the Federal Reserve Open Market Committee released minutes from their latest meeting which showed no surprises concerning their monetary policy on interest rates. The FOMC plans to continue down the path of keeping their key interest rate, the fed funds rate, near zero percent.
As a result of a low fed funds rate, interest rates on all deposit accounts will also remain where they currently are for the foreseeable future. Current CD rates at banks for 1 year certificates of deposit averaged 0.66 percent, a decline from last week’s average 1 year CD rate of 0.68 percent. The FDIC national average rate for 1 year certificates of deposit for the week ending April 29, 2013, are even less at 0.21 percent.
Of course, the rates listed are national average rates and you can find banks offering rates much higher than the averages. This week’s highest CD rates on our 1 year certificate of deposit rate table are from GE Capital Retail Bank at 1.04 percent with an APY of 1.05 percent. GE Capital Retail Bank’s current rate is almost 40 basis points higher than the national average rate as reported on MonitorBankRates.com and almost five times the average rate reported by the FDIC.
Current 2 year national average bank CD rates are at 0.83 percent this week, down from last week’s average rate of 0.87 percent. The FDIC’s national average 2 year rate this week is at 0.34 percent, unchanged from last week’s average rate. The best CD bank rates right now on our 2 year CD rate table are higher than the averages.
The bank offering the highest 2 year rate on our list this week is from CIT Bank at 1.19 percent with an APY of 1.20 percent, more than the average reported by MBR and more than three times the FDIC average rate. We also have many other bank rates listed on 2 year CD accounts that are more than three times the FDIC average.
The national average 5 year rate reported by MBR is at 1.26 percent this week, down from last week’s average 5 year rate of 1.30 percent. The FDIC national average 5 year rate this week is at 0.75 percent, unchanged from last week’s average 5 year rate. The best 5 year rates in our database this week are much higher from Nationwide Bank at 1.69 percent with an APY of 1.70 percent.
Both average CD rates and the best CD rates available barely moved this past month as the Federal Reserve Open Market Committee (FOMC) continues to keep a lid on rates moving higher. The most recent FOMC meeting minutes were released this week which showed the Fed plans to continue down the path of low interest rates for the foreseeable future.
1 year CD rates at banks as reported by MonitorBankRates.com this week are averaging 0.63 percent, unchanged from last week’s average CD rates. The FDIC’s weekly National Rates and Rate Cap survey has 1 year bank CD rates averaging even lower at 0.22 percent. The highest CD rates on 1 year certificates of deposit are also unchanged this week at 1.04 percent with an APY of 1.o5 percent.
The bank on our rate tables offering 1.04 percent rate on 1 year CD accounts this week is GE Capital Retail Bank. The second highest 1 year CD rate on our list this week is from three different banks. Colorado Federal Savings Bank, Home Savings Bank, and OneWest Bank FSB are all offering 1 year CD interest rates at 1.00 percent with an APY of 1.00 percent.
For 2 year CD rates this week, we see the average rate reported by MonitorBankRates.com is at 0.67 percent, up 3 basis points from last week’s average 2 year CD rate. The FDIC average 2 year CD rate this week is much lower at 0.35 percent. The best 2 year rates on our rate list are also changed this week at 1.19 percent with an APY of 1.20 percent. The bank offering that rate and yield on our tables this week is CIT Bank.
Average 5 year CD rates this week are also higher over last week. The current average 5 year CD rate is at 1.23 percent, up from last week’s average 5 year rate of 1.20 percent. The best 5 year CD rates in our rate database this week are from Barclays Bank at 1.83 percent with an APY of 1.85 percent.
Most of the 18 banks that have to be subjected to the Federal Reserve’s stress test don’t offer CD rates on the high end of rates available. Though that might change since the Federal Reserve has just completed their bank stress tests and the results might have some bearing on rates these banks offer.
While none of the 18 biggest bank holding companies failed the test, a majority of the banks might feel a need to increase their capital. Banks usually increase capital by increasing CD interest rates, savings rates, and other deposit rates to make it more attractive to deposit money into their bank.
When the stress test was applied, 10 of the 18 banks just barely have the minimum capital. If there is a recession worse than what the Federal Reserve uses in the stress test, these banks would have to raise capital in order to survive. Following is the list of 10 banks that just meet the minimum capital requirement after the tests are applied.
Right now none of these banks seem to be interested in attracting deposits since the rates they are offering on certificates of deposit are low. That is, except for Ally Bank, which has consistently been offering CD rates that are in the top 5 best available rates at any given time. The largest of these banks, Wells Fargo, is currently offering 1 year bank CD rates at a dismal 0.05 percent – you’re better off stuffing your money in a mattress.
Of the 10 banks, Ally Bank has the highest 12 month certificate of deposit rate. Ally Bank CD rates on 1 year CD accounts are currently at 0.94 percent. You can see Ally’s rate is much better than Wells Fargo’s rate and much higher than the FDIC national average rate of 0.22 percent. The same is true for all of Ally Bank CD rates, higher than the averages and higher than the banks listed above.
The banks that would have the minimum capital requirement in the test might increase their deposit rates in the coming weeks and months. I don’t expect these banks to start offering rates higher than Ally Bank’s rate unless they are really serious about increasing their capital.
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