Savings, CD, and Mortgage Rates Hit Record Lows - Weekly Rate Update

The Labor Department provided an early Holiday present today, providing a job's report that was far better than anyone expected. Yes, the economy still shed jobs, but only a seasonlly adjusted 11,000 in November versus projections of 100,000. The unemployment dipped for the first time in months, going from 10.2% to 10%. The employment news caused the dollar to strengthen and gold to plunge on expectations that the Fed may begin raising rates sooner than expected. Ironically, this has happened at the same time that savings rates, cd rates, mortgage rates, and muni bond rates are hitting multi-year lows. Coincidence? Probably not. The economy seems to have bottomed and rates are a lagging indicator. For savers, the night is darkest just before the dawn, and we may be seeing the faint glimmers of sun. For borrowers, the golden days may be coming to an end. If you were thinking of refinancing or buying a home, now is the time. Mortgage rates are at record lows and if the economy continues on its current trajectory, will begin rising soon.

CD and Savings Rates

Savings rates stayed at the 52-week low last week, holding steady at 1.61% APY. One year CD rates took the steepest dropped by 1 basis point to a new BestCashCow low of 2.00% APY. Three year rates actually rose by 8 basis points from 2.72% APY to 2.8% APY due to the addition of several new banks to the rate tables with aggressive pricing. Five year rates also increased by 2 basis points to 3.35% APY.

Looking at the yield ratio we have developed for deposit accounts, the spread the spread between savings rates and 36-month CDs reached a new all-time high. As we discussed, 3 year (36 month) CD rates rose due to aggressive pricing from several banks new to the rate tables. Nevertheless, the fact remains that longer-term CD continue to inch up even as savings rates remain steady or decline. If the economy continues to firm up, look for 3 and 5 year CD rates to continue rising and the ratio to go even higher.

It's still hard to recommend putting money into anything longer-term than a 12-month CD, especially with soaring equity markets and signs that the economy may be coming back to life. For those worried about interest rate risk, cd laddering may be a good way to smooth out the return you receive from your CD portfolio.

Mortgage Rates

Once again, savers' pain is a borrower's gain. Mortgage rates again hit record lows over the past week. According to the BestCashCow rate tables, the average 30-year fixed rate mortgage is below 5% at 4.957%. The fifteen-year fixed-rate mortgage average is 4.4%.

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