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Interest Rates Poised to Move Higher

Johns Wu Posted in CD Rates by Johns Wu
June 16, 2008 10:44 AM - 12 Comments

Good news for savers! The Federal Reserve has made it clear that they are actively going to try to fight inflation! This news has sent interest rates on long term certificate of deposits soaring! In the coming months, we should continue to see steady increases in deposit rates all across the board.

Money market and savings account rates are following suit as well. For instance, HSBC has recently been promoting their 3.50% APY online savings account (up from 3.05% APY).

  • Fed Funds Futures are now pricing in a 100% chance that the Fed raises rates by a total of 50 bps by the October meeting.
  • Futures place a 24% chance of a 75bps increase by October.
  • Futures By the January 2009 meeting, we have a 98% chance that Fed Funds rate will be raised by a total of 100 bps to 3%.

Bad News for Home Buyers
While high interest rates are good for savers, it is horrible news for people looking to take out a home loan. National 30 year fixed mortgage rates have skyrocketed from 5.70% APR last month to 6.30% APR on this news.

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Comments (12)
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  1. Bob said:
    on June 17th at 12:37 am

    If Bernanke has proved anything it’s that he’s a spineless dwarf that sets policy based on the rantings of MSNBC and Fox news. I guess why should he be any different than the rest of dumbed down America. Personally I wouldn’t count on anything except more incompetence and corruption from the New Three Stooges: Paulson-Bernanke & Bush

  2. Mike said:
    on June 17th at 04:57 am

    Whoever writes this blog is entirely too credulous. The Fed exists to bail out investment bankers and secondarily, to fight downturns in the business cycle. The main way it does both is to devalue the dollar, which has the additional benefit (to the powers that be) of reducing the value of outstanding debt. Therefore, borrowers and lenders are helped, earners and savers are screwed. So, don’t get all excited over a little blip.

  3. Bobbi said:
    on June 18th at 02:43 pm

    The Fed raising the Fed Funds rate is GOOD NEWS for home loan rates. Mortgage rates are born in the bond market. Inflation is the arch enemy of bonds. If you are receiving a fixed return on a bond, you hate inflation because that $1 you are getting today can’t buy as much a year from now if there is inflation. So, when the Fed moves to raise the Fed Funds rate, they are signalling they are fighting inflation. The bond markets almost always react favorably. Long term home loan interest rates go down. The Fed Funds rate affects only short term loans like home equity lines of credit based on Prime and credit card rates – not long term interest rates.

  4. AZ said:
    on June 19th at 03:02 am

    Well, on the subject of rates…what happens to home prices when the avg mortgage rate goes from 6% back to the historical 8 or 9% ?
    Don’t buyers buy a payment? And most are only willing to stretch for a higher payment when the psychology is there that makes them feel they need to move quickly. None of that exists.
    The only variable set to move when rates go up will be the price of the house.

  5. bd wong said:
    on June 19th at 03:17 am

    interesting poing AZ… i think that with higher mortgage rates, there will be fewer buyers. add to the fact that we are in a housing surplus right now (with desperate sellers), so i think we should actually see housing prices continue to tumble.

  6. Elizabeth said:
    on June 19th at 03:22 am

    how come the rates here are from bankrate now? I thought they did not include all the rates found on Bankcd.com, Emoneycentral.com, and Money-rates.com. Is this just the same list from bankrate that is less than great?

  7. jacob said:
    on June 22nd at 09:48 am

    anyone see the ad from alliance bank for a 4.00% savings account on this site? i checked it out- and it’s a terrible deal. you wouldn’t believe the kinds of things they charge fees for and the amount they charge you! things like mailing your pin are at least $18, they say $18 and up! just a warning to the poor folks out there who don’t read the fine print.

  8. jacob said:
    on June 22nd at 09:48 am

    *alliant bank

  9. Rick said:
    on July 2nd at 07:49 am

    What are you talking about, Jacob? Do you work for an Alliant competitor? Alliant hasn’t charged me a single fee on anything, and certainly not on providing the PIN. That $18 fee is only if you request Priority mailing services, as it clearly states. Jeez, Alliant provides 100% surcharge-free withdrawals at 75,000 ATMs across the country. Free first box of checks. Free 24/7, quickly-answered, U.S.-based, knowledgeable and friendly customer service. Interest always paid from date of deposit. They are absolutely the best financial institution I’ve ever had the pleasure of dealing with. And with all that you get the second highest Savings rate in the country despite the drop to 3.75 APY (maybe the highest again if IndyMac goes under)…all with no minimum balance fees, and only $100 required to earn interest. Sheesh! The only thing that could use some work is their online ACH system, but at least they have one! And they tell me they’re working on improving it. When these guys say it, they mean it.

  10. Rick said:
    on July 2nd at 07:57 am

    …and BTW, that $100 minimum earns the full 3.75% — no tiers. And they ALWAYS answer bankmail within 24 hours, with an intelligent, friendly response that really addresses the question. (That’s not say that I’ve *never* received an inaccurate reply from an Alliant CSR, but unlike other institutions it’s pretty rare.

  11. Ken said:
    on July 2nd at 03:52 pm

    BOA Account and get $75 Cash…no DD required.
    Opening an account is easy and takes just a few minutes. Sign up today to take advantage of this limited-time, online-only offer for Bank of America credit card customers only. Make sure Offer Code CH75TAD appears in the application.
    http://www.bankofamerica.com/prom…check_olb/

  12. Ken said:
    on July 2nd at 03:53 pm

    sorry…wrong link….

    http://www.bankofamerica.com/promos/jump/75ssccheck_olb/

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