Looking for good news on 5-year CD rates? Here’s the only stretch I can make.
Since the national lead tanked to 2.27% APY this spring, it’s held steady for almost five months without getting worse.
I know. That’s not really good news. But there simply isn’t any for this term.
Despite the Federal Reserve raising interest rates in December, 60-month certificates are one of three terms on our CD Rates Leaderboard that have declined rather than inched up.
And in the case of the top 5-year yield, the drop isn’t minor — it’s a hemorrhage.
Indeed, a look through Bankrate’s extensive database of the day’s best CD rates, while always smart, will show how dismal things have become.
This makes the case as strong as ever to seek out the best local deals you can qualify for, and we’ll tell you where to find almost two dozen that pay as much as 3.05% APY.
As for whether there is national relief on the horizon, we’ll tell you what’s expected from the Fed.
The top national yields
At the time of the Fed’s hike, savers could earn 2.45% APY with E-Loan’s 60-month certificate.
In January, that lead among nationally available bank certificates dropped to 2.30% APY, and in early March, to today’s 2.27% APY.
But that conveys only a portion of the bloodletting in this term.
In December, savers could earn at least 2.10% APY from 13 banks.
Today, only two banks are paying that much: leader State Bank of India-Chicago at 2.27% APY and sister operation State Bank of India-New York at 2.14% APY.
Both are independent U.S. branches of India’s largest bank, with the same FDIC insurance as all the banks we rank.
What’s ominous is that these siblings often align their rates. In fact, on Aug. 4 the New York branch raised three rates a few basis points, and one week later, Chicago followed suit.
But Chicago opted not to follow New York’s 60-month lead, keeping it (for now) at 2.27% instead of New York’s lower 2.14% APY.
So are we just waiting for the other shoe to drop? If so, the 5-year national lead will suffer another significant blow.
True, today’s lead still stands high above its post-recession low of 1.75% APY, endured in 2013.
But clearly, long-term savers deserve better.
Top Nationally Available 5-Year CD Rates
|State Bank of India – Chicago||2.27%||$2,500|
|State Bank of India – New York||2.14%||$5,000|
|Colorado Federal Savings Bank||2.00%||$5,000|
|The Federal Savings Bank||2.00%||$10,000|
|First Internet Bank of Indiana||1.92%||$1,000|
|Sallie Mae Bank||1.80%||$2,500|
|One West Bank||1.80%||$10,000|
How to earn more locally
Bankaholic readers know we track much more than the best nationally available bank returns.
That’s because there’s always a crop of community banks and credit unions offering more attractive deals.
True, they generally take deposits only from savers who live or work nearby, or are willing to jump through a membership hoop.
But the 20-plus deals below all exceed the national Leaderboard’s 2.27% APY for those who qualify, including two deals accessible to savers nationwide.
Top Local 5-Year CD Rates
We update the top local deals constantly, so be sure to check our roundup of the country’s best-paying credit union and community bank CDs for the latest offers.
Then see what you’ll earn with these deals by using our CD Rate Calculator.
Watching the Fed
Looking at the rest of the nation’s 60-month CDs, our weekly survey of banks and thrifts shows the national average taking a hit over the last year.
After climbing from its post-recession low of 0.77% APY in the summer of 2013 to 0.89% APY in 2015, it has since sunk to 0.80% APY, its worst level in two years.
It’s a far cry from February 2007, before irresponsible mortgage lending pushed the economy over a cliff, when the national 5-year average was 4.02% APY.
The enormous disparity has everything to do with the Federal Reserve lowering interest rates to record lows in December 2008, in an effort to stem the bleeding of the financial crisis.
Its December 2015 move reversed that policy and was planned to be the first of a series of small, gradual hikes over the next several years.
But global instabilities and a still-missing healthy inflation rate have given the Fed pause before announcing a second increase.
Fortunately, some relief could be in sight. The Fed next meets Sept. 20-21, and given an especially robust August jobs report, it’s possible they’ll announce Hike #2.
But if not in September, most economists believe December will finally bring an increase.
We’ll of course keep you posted of any major developments and, in the meantime, will hold our breath that things don’t get worse.