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Search and compare the highest CD rates available locally and nationally using our CD Rate list below. We maintain a list of the best certificate of deposit rates available at local banks, national banks and credit unions. Use our rate list to find the best CD rates available. Our CD database of rates is updated daily since CD interest rates change all the time.
Finally! After about 5 years I can write about a bank or credit union actually increasing their CD rates by a big margin. Pentagon Federal Credit Union recently increased the rates they pay on several certificate accounts (certificates of deposit). The largest increase in CD rates was on PenFed’s 5 year and 7 year accounts.
Until about two days ago, PenFed had 5 year CD and 7 year CD rates of just above 2.00 percent. Now the rates have been increased to 3.00 percent with an APY of 3.04 percent. With the increase in these rates, PenFed has blown away the competition. It will be interesting to see if any other credit unions or banks follow with higher CD rates.
Long term CD rates weren’t the only rates that were increased. PenFed also increased 2 year CD rates to 1.40 percent with an APY of 1.41 percent. The prior 2 year CD rate was at 1.25 percent with an APY of 1.26 percent. 3 year CD interest rates were increased to 2.00 percent with an APY of 2.02 percent. 4 year rates were increased to 2.20 percent with an APY of 2.22 percent.
PenFed now has the best CD rates for most CD terms on our rate lists. As with any credit union, to open a PenFed money market certificate (CD account) you have to be a member. There are also membership requirements to open an account. You can find out more by going to penfed.com.
Mortgage rates followed bond rates higher this Veterans Day while CD rates remain at current levels. On Friday, the October nonfarm payrolls report came in much stronger than any analysts expected, despite the federal government shutdown. For the month of October, 204,000 nonfarm jobs were created, much higher than the market forecast which ranged from expectations of 85,000 to 100,000.
The news sent long term bond rates higher as markets feared an end to quantitative easing by the Federal Open Market Committee (FOMC). Whether or not the FOMC slows their easing sooner than later remains to be seen. The next two nonfarm payrolls reports will also have been affected by the federal government shutdown, clouding the numbers.
Average 30 year conventional mortgage rates increased to 4.27 percent today, up from an average 30 year mortgage rate of 4.15 percent last Thursday. 10 year bond rates which closed on Thursday at 2.61 percent are now trading at 2.75 percent. During this time, the best CD rates on 1 year certificates of deposit remain stable at 1.05 percent APY.
FOMC Will Keep a Lid on Interest Rates Until 2014
Another factor coming into play as to when the FOMC will either start to slow or end their easing is if Janet Yellen is confirmed as the new Fed Chair. Yellen, who was picked for the job by President Obama, was thought to be a shoe-in for the job but politics are coming into play that may block her confirmation.
Lindsey Graham, the Senator from South Carolina, has stated he will block Yellen’s conformation until he gets more answers on Benghazi. Yellen has been in favor of keeping the easing going longer than most of her colleagues on the Fed Committee.
In the past, Yellen has stated the Fed should keep the federal funds rate at the current level, near zero percent, until the unemployment rate falls to 5.5 percent. The FOMC’s stated position has been to keep it near zero percent until the unemployment rate falls below 6.5 percent.
Either way it looks like the FOMC won’t start slowing their purchases until sometime early in 2014. The Fed won’t increase the federal funds rate until the summer of 2014.
Mortgage Rates and CD rates Will Remain Near Current Levels
For the rest of 2013, bond rates and mortgage rates will fluctuate in current ranges. The FOMC isn’t expected to lighten up on their purchases of long term bonds and mortgage-backed securities (MBS) in 2013. The FOMC will also keep the fed funds rate at near zero percent for the rest of the year.
This will keep a lid on how high interest rates move, which will be more dependent on economic data that is released. 10 year bond rates will remain under 3.00 percent and probably trade in a range of 2.50 percent to 2.90 percent. 30 year conforming mortgage rates will trade in a range of 4.20 percent and 4.70 percent.
CD rates on short term certificates of deposit won’t change at all since those rates aren’t tied to the direction of bond rates. Bank CD rates will move higher when the FOMC increases the fed funds rate, which shouldn’t be until 2014.
Since the third week of September, short term interest rates on bonds have been heading sharply higher but unfortunately, CD rates and other deposit rates haven’t moved much higher. We won’t see higher interest rates on certificates of deposits and other deposit accounts until the Federal Open Market Committee (FOMC) increases the federal funds rate, which isn’t expected to happen until sometime in 2014.
Interest Rates Moved Higher the Past Month
First it was the threat of a government shutdown, in which we are now in day 15 of the shutdown, driving rates higher. Then the possibility of the U.S. defaulting on its debt for the first time in history added to the increase in rates. The threat of default has had the greatest impact on driving interest rates higher on short term bonds.
1 month bond rates have been affected the most the past month, moving from zero percent one day in late September to 0.27 percent on Wednesday. Yesterday there were finally positive signs of hope that the Democrats and Republicans would avoid a debt default and possibly open the government early next week.
Possible Debt Ceiling Deal Hasn’t Lowered Interest Rates Yet
The positive news so far hasn’t forced interest rates lower. 1 month bond rates decreased only 2 basis points on the news, closing at 0.25 percent on Thursday. The markets are probably waiting until a deal is actually reached and finalized.
The deal that is being circulated is a short term deal, probably only 6 weeks which could be another reason why interest rates haven’t fallen on the news. Putting off another a fight for 6 weeks just to revisit the same issues again isn’t calming the markets. Even if Obamacare is off the table, there are still fundamental differences between Republicans and Democrats on the role of the government.
Mortgage Rates Have Fallen the Past Month
While short term bond rates have skyrocketed the past month, long term bond rates have actually fallen. This is positive news for mortgage rates which are tied to long term bond yields. The housing market is still recovering and any sharp rise in mortgage rates will kill the recovery.
We already had a sharp run-up in mortgage rates over the summer on fears the FOMC would stop buying long term bonds and mortgage-backed securities. When the FOMC decided to continue their purchases, mortgage rates started moving lower.
Future Direction of CD Rates and Mortgage Rates
First lets break this down to two categories, short term direction and long term direction of interest rates. Over the next few months, short term interest rates will still be held hostage by what happens in Washington D.C. What will likely happen is that deals will be reached on the debt limit and continuing resolution to fund the government.
These developments will send short term bond rates lower from current levels. CD rates, savings rates, and money market rates which haven’t moved higher during the past month will remain near current levels. Right now the best CD rates on 3 month certificates of deposit are at 0.45 percent. The highest CD rates on 1 year certificates of deposit are at 1.10 percent.
Mortgage rates today on 30 year conforming loans are averaging 4.27 percent will fall from current levels. The direction of mortgage rates are less dependent on what comes out of Washington and more dependent on what the FOMC does. Markets still believe the FOMC will start tapering their purchases and any hint of this actually happening will send mortgage rates higher.
30 year conforming mortgage rates could fall back below 4.00 percent in the coming months if the FOMC doesn’t taper. If the FOMC does slow or stop their purchases, average mortgage rates on 30 year conforming loans will soar back above 5.00 percent.
The Federal Open Market Committee (FOMC) has their two day meeting next week to decide the future direction of monetary policy. Analysts believe the FOMC will keep the federal funds rate at zero percent to ¼ percent, which is the range the rate has been in since December 2008. What most analysts believe the FOMC will change is tapering their purchases of long term U.S. Treasuries and mortgage-backed securities (MBS).
How will these two policies affect both short term and long term bank CD rates? Keeping the fed funds rate near zero percent will keep short term CD rates at current levels. If the FOMC does making an announcement about buying less than the current levels, $85 billion a month, in Treasuries and MBS purchases long term CD rates will move higher.
Fixed Mortgage Rates Higher Will Also Move Higher
The possibly of this the FOMC decreasing their purchases has already sent long term bond rates much higher over the past four months. 10 year bond yields hit a low point of 1.62 percent in early May are just under 3.00 percent this morning. This has sent fixed mortgage rates higher since lenders peg mortgage rates to long term bond rates.
Fixed mortgage rates on both conforming and jumbo loans have increased over 125 basis points, or 1.25 percent since early May. Average 30 year conforming mortgage rates today are at 4.67 percent and average 30 year jumbo mortgage rates are at 4.86 percent.
Right after meeting on Sept 17 and 18, the FOMC will release a statement. If there is any mention of slowing down purchases, 10 year bond yields will move above 3.00 percent and probably as high as 3.25 percent by the end of the week. This will send average 30 year conforming mortgage rates near 5.00 percent and 30 year jumbo mortgage rates to 5.25 percent.
Long Term CD Rates Will Increase
The best CD rates on 5 year certificates of deposit will also move higher, probably as high as 2.25 percent. The highest 5 year CD rates right now on our rate list are at 2.03 percent with an APY of 2.05 percent. Back in early May, the highest 5 year CD rates were around 1.50 percent.
While the best 5 year rates have moved higher, average 5 year CD rates haven’t gone anywhere. The FDIC’s Weekly Rates and Rate Cap survey in early May had 5 year CD rates averaging 0.75 percent. The most recent FDIC report released on September 3 had the average 5 year rate at 0.74 percent.
Short Term CD Rates Will Increase in 2014
While some banks have already increased long term CD interest rates, the majority of banks won’t increase short term CD rates until the FOMC increases the fed funds rate. The FOMC has stated they plan on keeping the rate near zero percent until the nation’s unemployment rate falls below 6.5 percent. The unemployment rate for the month of August was 7.3 percent, down 0.1 percent from the prior month.
The decline in the unemployment rate has been about 0.1 percent each month for the past year. If the current trend continues it will take another 8 months to reach a level of 6.5 percent. 8 months from August’s report would take us to April’s report, which will be released the first Friday in May of 2014.
Even if the rate hits 6.5 percent in the April 2014 report, the FOMC doesn’t meet until mid-June to decide interest rate policy. If this scenario plays out, the next fed fund rate increase might come after the two day meeting set for June 17 and 18. Soon after banks will increase deposit rates.
Of course, the Fed could hold an unscheduled meeting and increase the rate before the June meeting but that is unlikely. Incidentally, the Fed Chairman, Ben Bernanke, is scheduled to hold a press conference right after the scheduled June meeting. This would be a good time to explain to the public why they are increasing the fed funds rate.
Interest Rates Will Rise Sharply in 2014
The fed funds rate has been so low for so long in order to accommodate growth that the Fed would have to increase the rate dramatically just get the rate to a neutral point. A neutral point is where the rate isn’t stimulating demand or constricting growth for goods and services. That point, with the current inflation rate at 1.7 percent, would be a fed funds rate near 2.00 percent.
The Fed won’t increase the rate from zero percent to 2 percent in just one increase. They will do it over several months next year. The FOMC has four more scheduled meetings after the June 2014 meeting. The Fed will probably make a series of 0.50 percent increases in the Fed funds rate until it reaches 2.00 percent.
Banks will start increasing interest rates on deposit products such as certificates of deposit, savings accounts, and money market accounts. The increases will also come in steps over the second half of 2014.
Stay Invested in Short Term CDs, Savings or Money Market Accounts
Make no mistake, interest rates are moving higher. Long term CD rates will move higher in 2013 but I wouldn’t lock in to a long term certificate of deposit this year because rates are so low. The smart money is staying invested in shorter term certificates of deposit, savings accounts, and money market accounts to be able to ride the rate increases higher.
Chances are you know how a traditional certificate of deposit works. You invest a certain amount of money for a certain time period, anywhere from 1 month to 10 years, and your investment receives a fixed rate of interest. If you opened a certificate of deposit anytime during the last five years, you know how low CD rates are these days.
Although current bank CD rates are near historical lows right now, rates will be moving higher over the next 18 months. If you have a certificate of deposit maturing any time in the next 18 months, you shouldn’t lock into a low CD rate for a long term. Heeding this advice will limit you to investing in shorter CD terms but with shorter term CD accounts come lower CD rates.
There is an option for you to invest in a long term CD account and still be able to participate when rates move higher. A few banks offer what is called Step-Up certificate of deposits. With these types of accounts, you are able to have the CD interest rate on the account increased anytime after opening the account.
For example, you open up a 48 month CD account right now and the CD rate is at 1.50 percent. Let’s say in 18 months the same bank increases 48 month CD rates to 3.00 percent. At that point, you can ask the bank to increase the CD rate to 3.00 percent. From that point on, your 48 month account earns a rate of 3.00 percent instead of 1.50 percent.
Keep in mind that you’ll have to ask the bank to increase your rate. Don’t count on the bank to automatically increase it when rates move higher. This means you’ll have to keep track of CD rates at your bank. You may also find yourself in a situation when rates moved higher, you ask the bank to increase the rate and then a few months later rates move higher yet again.
Get a Higher CD Rate After the FOMC Meets
Most accounts allow you to increase the interest rate only one time, so make sure you ask at the right time to have your account rate increased. A good course of action to take if you want the rate increased is to check when the Federal Open Market Committee meets. When the FOMC meets, they usually lower or increase the federal funds rate.
In this interest rate cycle, rates will move higher and will probably continue to move higher for several years. So timing when the FOMC increases the fed funds rate may ensure you get a higher rate on your account. FOMC publishes their calendar in advance and you can view the 2013 and 2014 calendar here: FOMC Meeting Calendar.
Some Banks Allow Two CD Rate Increases
On longer term accounts, some banks allow you to increase the interest rate more than once. Ally Bank offers a 48 month account that allows you to ask for a rate increase twice during the 4 year term. Ally Bank’s Raise Your Rate CD currently has a rate of 1.29 percent with an APY of 1.30 percent.
Step-Up Account CD Rates Vs. Traditional Account CD Rates
You can easily compare Step-Up account CD rates with traditional account CD rates. Most of the time you will quickly see that Step-Up accounts usually don’t have the best CD rates available. If you open a Step-Up account now, you will be able increase the rate on Step-Up accounts over time as rates move higher, but you don’t have that option with traditional accounts. This means that in the long run, you may end up with the highest CD rate with the Step-Up account.
Obviously when and if rates increase will determine which account is best to invest in. You won’t really know beforehand but one thing is for sure – rates are low now and will be moving higher for years to come.
Interest rates on U.S. Treasuries and mortgage rates will retreat from recent gains for a number of reasons. The run-up in interest rates the past three months was on the expectation that the Federal Open Market Committee (FOMC) would curtail their purchases of bonds and mortgage backed securities (MBS).
The increase in long term Treasury yields and mortgage rates was overdone and wasn’t warranted. The most recent FOMC statement released for their July meeting showed no change in plans for purchasing $45 billion a month in longer term U.S. Treasuries and $40 billion a month in MBS. The recent weaker economic data and consumer confidence number will also keep a lid on any increase in interest rates.
Short Term CD Rates, Savings Rates, and Money Market Rates Remain Low
Since early May, yields moved up over 100 basis points on most long term Treasuries. Mortgage rates also moved up over 100 basis points on fixed conforming loans. Unfortunately, short term CD rates, savings rates, and money market rates haven’t moved much higher from record lows. The best CD rates on 1 year certificates of deposit on RatesORama.com are at 1.04 percent. The best savings rates are at 1.00 percent and the best money market rates are at 0.90 percent.
Friday’s payroll report for the month of July was disappointing and sent equity markets lower. 10 year bond yields are following equities lower and are down 12 basis points this morning to 2.60 percent, down from the 52 week high of 2.74 percent. A recent report on consumer confidence was released a few days ago and show confidence is at the lowest point since April.
Lower Economic Confidence Index Will Drive Mortgage Rates Lower
Gallup’s Economic Confidence Index for the week ending July 28, registered at -13, the lowest point since April and is 10 points lower than it was in early June. Weak employment news and weak consumer confidence will continue to drive bond yields lower which will in turn drive mortgage rates lower.
The economic calendar of data expected to be released this week is heavy but the only numbers that could force rates lower are initial jobless claims and continuing jobless claims. If either of those numbers come in weaker than expected, 10 year bond yields will move under 2.50 percent.
Small Bump Higher in Long Term CD Rates
Long term average CD rates haven’t moved at all the past several months. Current average 5 year bank CD rates in the FDIC’s national rate survey this week are at 0.74 percent. Back in May, 5 year CD rates at banks were averaging 0.75 percent. While average rates are down slightly the past three months, there are some banks increasing rates.
In late July we had a bank in our database increase 5 year CD rates above 2 percent. Now we have two banks offering 5 year rates above 2.00 percent. iGOBanking increased their 5 year rates to 2.03 percent with an APY of 2.05 percent in late July. EverBank recently increased their 5 year rates to 2.04 percent with an APY of 2.06 percent.
We are starting to see an uptrend in long term CD rates because of higher long term bond yields. We’ve already seen an increase of over 0.25 percent on 5 year CD rates. Just last month, the best CD rates on 5 year certificates of deposit on our rate list were well below 2.00 percent at 1.73 percent. Now the best CD rates on our 5 year certificate of deposit rate list are at 2.03 percent with an APY of 2.05 percent.
While long term average CD rates are moving higher right now, short term rates are still stuck at low levels and will remain low for the foreseeable future. The highest CD rates this week in our rate database of 1 year certificates of deposit remain at 1.04 percent with an APY of 1.05 percent.
The bank offering the highest CD rate this week on our list is igobanking. Last month the highest rate at 1.73 percent was from EverBank. Whether or not this increase will start a trend remains to be seen. The driving factor keeping CD rates low, a federal funds rate at near zero percent, is still in place.
Fed Funds Rate and CD Rates
For the past couple of years, the Federal Reserve has stated that they plan to keep the fed funds rate near zero percent until the unemployment rate falls below 6.5 percent. The Fed believes the rate will fall below 6.5 percent sometime during 2015. The current unemployment rate is at 7.6 percent. The Fed may wait even longer to increase the fed funds rate if some Fed Governors have their way.
One Fed Governor, Narayana Kocherlakota, the President of Federal Reserve Bank of Minneapolis, believes they should wait until the unemployment rate falls below 5.5 percent to increase the fed funds rate. An unemployment rate of 5.5 percent probably won’t happen until sometime in 2016 or 2017. If the Fed waits until then to increase the fed funds rate, we have another 3 or 4 years of low CD rates.
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