CD Rates | Find the Best CD Rates Today
Best CD Rates| RatesORama.com has a List of the Best CD rates Available
Certificates of deposit (CDs) are one of the safest investments available. Make sure to only invest in CD accounts that are insured by the Federal Deposit Insurance Corporation (FDIC). When you invest in a CD your money is locked in a time deposit and you gain access to your funds when the CD matures. You can gain access sooner but you will pay an "early withdrawal penalty" which can be as high as all the interest earned depending on the CD term.
Longer term CD rates continue to move higher this month as banks are raising rates in hopes of enticing depositors into longer term certificates of deposit before rates move higher in 2014. Banks realize that they will have to increase both short term and long term CD rates next year when the Federal Open Market Committee (FOMC) increases their key benchmark interest rate, the federal funds rate.
This month we have 5 different banks offering 5 year CD rates just under 2.00 percent or higher. Last month we had 3 different banks offering 5 year rates that high and in late summer, there were no banks offering rates near 2.00 percent. Over the same duration, the highest 1 year CD rates remain just above 1.00 percent at 1.05 percent APY.
Best Long Term CD Rates This Month
Below is a list of the best CD rates on long term certificates of deposit. Though we listed the best rates here, we recommend sticking with certificates of deposit with terms of 6 months or less because CD rates at banks are moving higher in the summer of 2014.
Top 5 Year CD Rates
Top 4 Year CD Rates
Top 3 Year CD Rates
Top 2 Year CD Rates
Top 1 Year CD Rates
Best Short Term CD Rates
As you can see from the CD interest rates above, the highest overall rate is just above 2.00 percent. By the end of 2014, we believe 1 year CD rates will move as high as 2.50 percent to 3.00 percent, so it doesn’t make sense to lock into a long term account now. That being said, below is a list of the highest CD rates for CD terms of less than 1 year which is the only CD accounts you should be investing in right now.
Top 9 Month CD Rates
Top 6 Month CD Rates
Top 3 Month CD Rates
The debt default has been averted and after 16 days, the government has reopened for business. What economic damage has been done remains to be seen but initial analysis from Standard & Poor’s says the economy took a $24 billion hit and growth in the 4th quarter will be 0.6 percent lower as a result of the shutdown.
In the days leading up to the shutdown, short term bond yields skyrocketed while short term CD rates remained the same. On September 19, 1 month U.S. Treasury yields that averaged 0.00 percent had increased to 0.32 percent on October 15, two days before the government would have defaulted on the 17th.
1 Month Bond Rates and CD Rates
The best CD rates in our 1 month certificate of deposit rate database before the shutdown were at 0.15 percent. The best rates today are also at 0.15 percent. Once a deal was announced, one month Treasury yields fell to 0.14 percent and yesterday fell back down to the pre-crisis level of 0.01 percent.
For the past several years, both short term and long term CD rates were higher than the equivalent term bond rates. This is once again the case since 1 month bond rates have returned to the same level as they were last month.
Round 2 of Budget Negotiations in Early 2014
The current crisis has been averted but we may find ourselves back in the same mess early next year if some Tea Party folks have their way. The deal reached between Republicans and Democrats was a short term deal. They agreed to fund the government until January 15 and put off hitting the debt ceiling until February 7.
What will play out in early 2014 remains to be seen but it will be interesting. The Senate Minority leader, Mitch McConnell, defended the deal and slammed the tactics used by Senator Cruz and the Tea Party House Republicans. I do hope another crisis is averted and no further damage is done to this still-fragile economy.
Best CD Rates This Month
You already know the best 1 month rates are at 01.5 percent. Right now the best 3 month CD rates in our database are at 0.45 percent.
The best 6 month rates in our database are the best deal overall when you consider the rate and term. The best 6 month CD rate right now is at 1.00 percent! That is much higher than rates on most 12 month certificates of deposit. The bank offering that rate and yield right now is Zions Direct. The highest CD rates on 1 year certificates of deposit are at 1.10 percent, slightly higher than the top 6 month rate.
When Will CD Rates Move Higher?
There is light at the end of the tunnel as long as the politicians don’t ruin things. CD rates and all bank deposit rates are dependent upon the federal funds rate and when the fed funds rate is increased, deposit rates will also increase. While we don’t know exactly when, thanks to the Federal Open Market Committee (FOMC), we can give a guesstimate. The FOMC says they plan to keep the fed funds rate at its current level, zero percent to ¼ percent until the nation’s unemployment rate falls below 6.5 percent.
The August unemployment rate was at 7.3 percent, only 0.8 percent higher. The rate is expected to remain at 7.3 percent in the September report. We should have gotten the September report on October 4 but courtesy of the politicians closing the government won’t get the numbers until October 22.
Before the shutdown, we estimated the rate would fall to 6.5 percent sometime in the spring of 2014, now that might have been put off by a few months. Our original forecast for when bank CD rates would increase was early summer 2014 but now it might not happen until late summer or early fall 2014. Many variables play into this and the shutdown and its aftereffects are yet to be fully realized.
Expect CD Rates to Move Sharply Higher When Rates Finally do Move Higher
When CD interest rates finally do move higher in 2014 it will have been almost 6 years that we have suffered with the lowest rates available in our lifetime.
When rates move higher, the increases will be rather quick and it won’t take rip-roaring growth or high inflation to send rates higher. The fed funds rate at zero percent is so accommodating for growth. Just to get to a neutral rate where the fed isn’t spurring growth will mean several 0.50 percent increases in the rate. This will probably happen before the end of 2014, so we could quite possibly see 12 month CD rates somewhere between 2 percent and 3 percent in just over a year.
That being said, one recommendation I can make right now is to not lock into a CD account of more than 1 year. If you lock in a low rate on a 2 year to 5 year CD account, you will miss out on higher rates. The alternative is having to cash in early and incur an early withdrawal penalty.
All eyes are on the Federal Open Market Committee (FOMC) this week as they wrap up their two day meeting today. Shortly after their meeting, the FOMC will release a statement on economic policy. Over the past several years there hasn’t been much of a policy change meeting to meeting but this time is different.
There are a few policy changes the FOMC can make as the economy improves and the unemployment rate falls. The first and biggest policy tool the FOMC has is the option to change the federal funds rate – the rate at which banks pay to borrow money overnight. The second policy tool the FOMC can employ is tapering their purchases of mortgage-backed securities (MBS) and long term U.S. Treasuries.
FOMC has Driven Mortgage Rates and CD Rates to Record Lows
The FOMC has been buying $40 billion a month in MBS and $45 billion a month in long term U.S. Treasuries to drive long term interest rates down. These policy tools have been every effective and drove mortgage rates and long term bond yields to record lows over the past several years. The downside to this is that CD rates, savings rates, and all deposit rates have also been driven down to record lows.
Fixed conforming 30 year mortgage rates hit a record low of 3.27 percent earlier in 2013, the lowest point ever recorded by Freddie Mac. Average 1 year bank CD rates in the Federal Deposit Insurance Corporation’s (FDIC) weekly rate survey hit a low of 0.20 percent two days ago.
What will the FOMC Statement Say?
Over the past several months, long term bond yields and mortgage rates moved over 100 basis points higher on the possibility of the Fed slowing their purchases of MBS and long term bonds. Rates moved higher despite the Fed still buying a combined $85 billion a month in both bonds and MBS.
The Fed is very aware of market forces driving these rates higher so they won’t change policy too much which would scare the markets into sending rates even higher. The Fed won’t increase the fed funds rate from the current level of zero percent to ¼ percent. In fact, the Fed has uncharacteristically stated they plan to keep this rate at near zero percent until the nation’s unemployment rate falls below 6.5 percent.
What the Fed will change during this meeting is in all likelihood announcing a tapering of their purchases but I believe they will slowly wind down their purchases. They will probably make monthly incremental steps, probably $5 billion a month less in purchases, nothing too drastic that would sent rates higher quickly.
How the Markets Will React
The reaction from the markets will be muted. 10 year bond rates have already soared from around 1.60 percent in mid May to just under 3.00 percent in late August. 1o year rates will be range bound from 2.60 percent to 3.00 percent for the rest of 2013. This will keep a lid on 30 year conforming mortgage rates from rising above 5.00 percent.
The response from equities will also be muted but longer term as the liquidity from the Fed dries up, the markets will underperform their gains since the financial crisis.
Will Bank Increase CD Rates if the Fed Changes Policy?
This time around the answer is no, even if the Fed slows their purchases. CD rates at banks and credit unions won’t move higher until the Fed increases the fed funds rate, which won’t happen until the unemployment rate falls below 6.5 percent. The current unemployment rate is at 7.4 percent and will probably fall to 6.5 percent sometime in the first half of 2014.
The Fed will increase the fed funds rate sometime in the summer of 2014. At that point, banks will follow suit by increasing CD interest rates. The increase in the fed funds rate will probably come in 50 basis point (0.50%) increments. The increase in CD rates will come soon after and probably will also be in 50 point increments.
Which CD Terms are Best Until CD Rates Move Higher?
Since rates on certificates of deposit will finally be moving higher after over 5 years of declining, don’t lock into a long term CD right now. Banks know rates are moving higher and have increased long term CD rates, 5 years or more, to entice people to look into a long term CD.
The best CD rates on 5 year certificates of deposit moved about 33 percent higher the past month. The best rates used to be around 1.50 percent but now you can find banks offering rates just above 2.00 percent. While a 33 percent move higher in 5 year rates is a big jump, locking in a 5 year CD rate at 2.00 right now wouldn’t be a good move.
By the end of 2014, 1 year CD rates will be around 2.00 percent if the economy continues to grow at the current pace. If the economy picks up steam and the inflation rate moves above the Fed’s long term targeted range of 2.00 percent, rates will move much higher quickly. If this scenario plays out, 1 year CD rates will move to around 4.00 percent to 5.00 percent.
Long term rates will also move higher but don’t lock into a 5 year CD until we have reached the peak of Fed tightening. At this point we can’t predict when this will happen but hopefully it won’t happen for at least three more years.
Current Best CD Rates Available
The recent increase in long term bond yields has cooled the past week while the best long term CD rates moved above 2.00 percent. Just a few weeks ago there weren’t any banks offering 5 year CD rates above 2.00 percent in our database. Now there are two banks offering 5 year rates just above 2.00 percent at RatesORama.
EverBank is currently offering 5 year rates at 2.04 percent with an APY of 2.06 percent and iGObanking is offering 5 year rates at 2.03 percent with an APY of 2.05 percent. If you have a 5 year certificate of deposit maturing soon and have been shopping around for the best CD rates, these rates might seem shocking to you.
If you compare these 2 percent 5 year CD rates with the current average 5 year CD rate, you’ll see these rates aren’t that bad after all. 5 year CD rates at banks are averaging 0.74 percent in the FDIC’s Weekly National Rates and Rate Caps for the week ending August 12, 2013. These rates are also better then the average 5 year jumbo CD rate which are currently averaging 0.77 percent in the FDIC’s survey this week.
Best CD Rates on 5 Year Certificates of Deposit
Average 4 year CD rates this week are at 0.57 percent and average 4 year jumbo CD rates are slightly higher at 0.60 percent. This week the highest CD rates on 4 year CD accounts in our database are also from EverBank at 1.60 percent with an APY of 1.61. The second highest CD rate is from Intervest National Bank at 1.59 percent with an APY of 1.60 percent.
Highest CD Rates on 4 Year Certificates of Deposit
The best CD interest rates on 3 year certificates of deposit are from Intervest National Bank at 1.39 percent with an APY of 1.40 percent. The second best rate this week is from two different banks at 1.24 percent with an APY of 1.25 percent. The two banks offering this rate and yield are AloStar Bank of Commerce and Barclays Bank.
Average 3 year CD rates in the FDIC survey this week are much lower than the rates reported by RatesORama.com. The current average 3 year CD rate in the FDIC survey is at 0.45 percent. The rates in our database are also much higher than the average 3 year jumbo CD rates. The current average 3 year jumbo rate is at 0.47 percent.
Best 3 Year CD Rates
The best 2 year rates in our database are much higher at 1.14 percent. Average 2 year CD interest rates this week are at 0.33 percent and average 2 year jumbo CD interest rates are at 0.35 percent. Nationwide Bank is offering 2 year rates at 1.14 percent with an APY of 1.15 percent. The second highest rate in our database is at 1.10 percent from My e-BAnC by BAC Florida Bank and The Palladian PrivateBank.
Highest 2 Year Bank CD Rates
Average 1 year CD rates this week are at 0.20 percent while average 1 year jumbo CD rates are slightly higher at 0.21 percent. The best 1 year CD rates in our database are more than 5 times the FDIC average rate. The best 1 year rate this week in our database is from GE Capital Retail Bank at 1.04 percent with an APY of 1.05 percent.
Best CD Rates 1 Year Certificates of Deposit
Interest rates on mortgage loans moved higher the past three months along with long term bond yields. Are higher CD rates on the way? Don’t count on it any time soon. You would think that bank CD rates and other deposit rates would move up since mortgage rates have gone up around 1.00 percent and long term bond yields are also up around 1.00 percent.
Deposit rates are not moving higher because banks are flush with cash and have no need to offer higher rates to attract deposits. Another reason banks don’t need cash is the loan volume isn’t there to soak up deposits. Stricter mortgage lending requirements have dampened the demand for loans.
Banks have also raised their lending requirements for business loans as well, which has also decreased demand. The one area of loan demand that has increased is consumer credit. The Federal Reserve tracks consumer credit monthly and for the month of May both revolving and non-revolving consumer credit have increased. Revolving credit increased at an annual rate of 9-1/4 percent, while non-revolving credit increased at an annual rate of 8 percent.
The increase in consumer credit alone won’t send deposit rates higher. Loan demand overall has to increase for banks to have a need to increase deposits. Another factor holding CD rates down is the Federal Reserve. The Fed’s current policy is to keep interest rates low to help the economy expand. The Fed’s key benchmark interest rate, the federal funds rate, has been at zero percent to one quarter percent for almost 5 years now.
CD interest rates, savings rates, and money market rates will all start moving higher in the coming years but don’t expect any major increases unless the economy and inflation really start to take off. Savers should consider staying in shorter term certificates of deposit of a year or less. Another option is to stick with savings accounts or money market accounts but you can get higher rates with CD accounts.
You have to search for the best CD rates because the difference between the lowest CD rate and highest CD rate available is substantial. For example, the best 1 year CD rate on our list right now is from GE Capital Retail Bank at 1.04 percent with an APY of 1.05 percent. The lowest 1 year CD rate on our list is from iGOBanking at 0.15 percent.
As you can see, a rate difference of 0.89 percent between the best and worst rate available can add up. On a $100,000 CD, the annual interest earned is $890. On $1,000,000 the difference in interest earned is $8,900. You can search for the highest CD rates here at RatesORama.
Dealing with low CD rates and other deposit rates for five years is getting tiring but unfortunately we have another two years of low interest rates. In the most recent Federal Open Market Committee, 15 of 19 Fed officials indicated they don’t expect to increase the federal funds rate until sometime in 2015. This means bank CD rates will also remain at current levels to at least 2015.
The 2015 date also depends upon a certain level of economic growth and for the nation’s unemployment to fall below 6.5 percent. Current economic news released showed growth slowing down, so it may be even more than 2 years for the Fed to increase the fed funds rates. First quarter GDP growth was lowered to 1.8 percent, down from the first estimate of 2.4 percent.
Slow Growth Will Keep CD Rates Low
Slower growth and inflation within the Fed’s target of 2 percent will force the Fed to keep interest rates where they are and continue their stimulus programs. This will keep downward pressure on CD rates, savings rates and all loan rates. The Fed has been buying $85 billion a month in mortgage-backed securities and long term U.S. bonds to keep long term interest rates low. The Fed will continue its existing policy of reinvesting principal payments in mortgage-backed securities and U.S. Treasuries.
The markets were running for the exits recently selling U.S. treasuries and driving treasury yields considerably higher.
Fed Officials Talking Down Interest Rates
Two Fed officials had speeches to ease concerns about the Fed ending their stimulus programs. Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta had some colorful words on the matter:
Another Fed official William C. Dudley, president of the Federal Reserve Bank of New York, made the case that the markets are overreacting to Ben Bernanke’s speech and the increase in interest rates is unwarranted. Following are some of his remarks at the Regional Economic Press Briefing, New York City.
Bond Yields and CD Rates
The recent increase in bond yields won’t last. Interest rates will move lower again over the next several months. While we probably won’t see 10 year bond yields break through the record low of 1.62 percent this year, we will see rates fall back to the 2.00 percent level. Short term CD rates on 1 year certificates of deposit will remain at current levels of around 1.00 percent.
Search and compare CD rates at banks by using our rate tables at CDRates.RatesORama.com.
The past month long bond yields have been on a tear. Bond holders have been selling bonds on fears the Federal Reserve will stop purchasing long term bond to drive yields lower. Bond prices move inversely to interest rates, when bond prices move lower, bond interest rates move higher.
Since the beginning of May 10 bond yields increased 78 basis points, from 1.66 percent to 2.44 percent, that is an increase of almost 50 percent in less than two months. During that time, the best long term CD rates haven’t made any moves higher and average long term rates are slightly lower.
The highest CD rates on 5 year certificates of deposit this week are at 1.76 percent, the same point rates were in early May. CD rates have languished the past month but rates are still much higher than bond yields for equitant terms. 5 year bond yields closed yesterday at 1.31 percent, 45 basis points lower than 5 year CD rates.
Short term bond yields and bank CD rates haven’t moved higher at all the past two months. 1 year bond yields closed on May 1st at 0.15 percent, yesterday 1 year bond yields closed at 0.14 percent.
Best 1 Year CD Rates
The best CD rates on 1 year certificate of deposit rates were just above 1.00 percent in early May and are still just above 1.00 percent at 1.04 percent. During the same timeframe, average 1 year CD rates haven’t changed at all at 0.21 percent.
Long term bond yields have been on a tear because investors are worried the Federal Open Market Committee will stop quantitative easing.
Third Round of Quantitative Easing
The current round of quantitative easing, is the third round of easing the Fed has embarked on, involves the FOMC buying $85 billion a month in mortgage backed securities and U.S. Treasuries. This round of easing (QE3) is to drive long term bond yields and mortgage rates lower.
Besides the purchases, the FOMC has also been reinvesting principal payments from its holdings back into more debt. Investing principal payments of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
Long Term Interest Rates
These policies have forced long term interest rates to record lows over the past year but haven’t been working the past two months. The recent increase in bond yields and mortgage rates will probably only be temporary since the FOMC hasn’t actually changed their policies yet. The markets have gotten ahead of themselves forcing rates and yields higher.
Future Direction of CD Rates
As far as CD rates moving higher that all depends on when the FOMC increases their benchmark interest rate, the federal funds rate. The current targeted rate is between zero percent and one quarter percent. In the most recent FOMC statement the Committee said they plan to keep the fed funds rate where it is well past the point they stop QE3.
One of two things have to happen for the Committee to increase the fed funds rate, the unemployment rate has to fall below 6.5 percent or the outlook for inflation has to be half a percent higher than the Committee’s targeted inflation rate of 2.00 percent. Until that time deposit rates will also remain low. You can read this excerpt on the fed funds from the Committee’s June Statement below, or read the entire statement here: FOMC June Statement.
You can find the best short term and long term CD rates by searching our rate tables here: CDRates.RatesORama.com
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