It turns out that the rise in certificate of deposit (CD) rates in October was not just a fluke. In November, CD rates continue to climb as the jobs market also continues to improve. Last month, the national averages for 36-month, 48-month and 60-month CD terms increased by at least 0.02% APY.
The 60-month CDs are becoming more attractive as many online banks offer rates that reach the 2.00% APY level. Five online banks — EverBank, CIT Bank, VirtualBank, GE Capital Bank and Barclays Bank — offer 60-month CD rates of at least 2.00% APY (minimum deposit to earn the rates vary).
The boost in CD rates poses a double-edged sword for savers who may be interested in locking in their funds in a CD but are concerned that rates will continue to rise. Building a CD ladder is one way to mitigate that risk.
Rates riding on Fed decisions
The sustained increases in CD rates suggests that banks anticipate a move by the Federal Reserve to relieve some of the downward pressure on interest rates. Economists have been speculating that the central bank is close to winding down its quantitative easing program.
To further reinforce confidence that interest rates will soon rise, the unemployment rate has been falling. The Fed said it would consider raising interest rates when the jobless rate fell to 6.5 percent. The November unemployment rate was 7 percent, down from 7.3 percent in October.
However, some Fed board members are proponents of lowering the unemployment rate threshold, which would delay any impending rate hikes and is likely to bring forth longer periods of low deposit rates.
The table below shows the changes in national averages for CD rates from Oct. 31, 2013 to Nov. 30, 2013. The figures are based on the data acquired from banks that are tracked by MyBankTracker.
|CD Term||APY (as of 10/31/13)||APY (as of 11/30/13)||APY Change|
Compare the top CD rates that are available currently: