Images by GettyImages; Illustration by Hunter Newton/Bankrate
The year 2023 came to a close with yields that had peaked on certificates of deposit (CDs) and other deposit accounts. Although Federal Reserve rate cuts are possible in 2024, it should remain a strong year for savers as annual percentage yields (APYs) stay high overall and inflation hopefully cools further.
“Gearing up for eventual Fed rate cuts, we’ll see a modest trend toward lower yields beginning early in 2024,” says Greg McBride, CFA, Bankrate chief financial analyst. “However, it will still be a banner year for savers when those returns are measured against a lower inflation rate.”
Key takeaways
- The national average rate for one-year CD rates will be at 1.15 percent APY by the end of 2024, McBride forecasts, while predicting top-yielding one-year CDs to pay a significantly higher rate of 4.25 percent APY at that time.
- The national average yield for five-year CDs at the end of the year will be 1 percent APY, McBride predicts, with top-yielding five-year CDs paying 4 percent APY.
- The national average rate for one-year CD rates started out at 1.07 percent in 2023, and it rose to 1.73 percent by the end of the year. At the start of 2023, the national average rate paid by five-year CDs was 1.16 percent, and it climbed to 1.43 percent by year's end.
CD rates continued to climb in 2023
In 2023, savers who put money into competitive CDs locked in high yields, as interest rates continued to rise at the fastest pace in 40 years. The national average APY for one-year CDs ended the year 0.7 percent higher than at the beginning of the year, while the average for five-year CDs ended the year 0.3 percent higher than at the start.
Average CD APYs showed signs of leveling off beginning in September and continuing through the end of the year. Competitive banks often tend to lift their yields when the Federal Reserve raises rates, which the Fed did earlier in 2023 while overall leaving rates untouched in the second half of the year.
CD investors could see another strong year
Rates on high-yielding CDs and savings accounts generally fluctuate along with the Fed raising or lowering interest rates. Central bankers signaled in recent economic projections that they see some cuts to the Fed’s key interest rate in 2024, albeit on a scale that would still keep that rate at the highest level since 2007.
The year 2024 will be a good one for CD investors, McBride says. “There will continue to be a substantial difference between the national average and the highest-yielding, nationally available offers, so shopping around remains of paramount importance. In 2024, shopping around for better yields will mean outearning inflation, but not shopping around and settling for average will mean trailing inflation.”
What will the Federal Reserve do in 2024?
Although inflation has been cooling, more progress is needed on that front to ward off further rate hikes and to spur rate cuts in 2024, says McBride, who predicts two Fed rate cuts in 2024 of 25 basis points each. Currently, the range for the federal funds rate sits at a 22-year high of 5.25 to 5.50 percent.
In the months leading up to 2024, the Federal Reserve has opted to leave rates unchanged, after raising them 11 times in this economic cycle.
“The sooner you lock in [with a CD rate], the better, because yields have peaked, but inflation is going to continue to decline throughout 2024,” McBride says. “For this reason, that fixed return you lock in on a CD is going to look better and better in after-inflation terms throughout the year.”
Where to find the best CD rates
Bankrate can help you find the best rates available.
- Search online banks. These may offer high yields as an attempt to draw customers from traditional brick-and-mortar banks. An added bonus is that online banks commonly require low minimum opening deposits (and they often don’t charge monthly service fees for many accounts).
- Search credit unions. Credit unions are worth checking into as well since these not-for-profit institutions often share profits with their members in the form of higher APYs.
- Consider minimum deposit requirements. Once you’ve identified a few high-paying banks or credit unions, be sure to select one that has a minimum CD opening deposit you’re comfortable with. While some CDs have no minimum deposit requirements, others may require up to $10,000, or more.
- Take note of early withdrawal penalties. As a rule, you shouldn’t commit funds to a CD that you may need in the meantime for emergencies or living expenses. This is because CDs typically charge a penalty for early withdrawals. That said, it’s still a good idea to familiarize yourself with a CD’s early withdrawal penalty before choosing it. In general, the longer the term, the bigger the penalty you’ll pay.
Taking the time to shop around for the best high-yield CD pays off, as you’ll reap the benefits of the current high-rate environment.
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FAQs
Key takeaways
What is the projection for CD rates in 2024? ›
CD Rates Forecast 2024
The CME FedWatch Tool, which measures market expectations for federal funds rate changes, shows that most experts expect rates to sit between 4.50% and 5.25% by December 2024.
What are interest rates going to do in 2024? ›
Mortgage rate predictions 2024
NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024. While there's some dispute on exactly how much rates will decrease, the general consensus is that mortgage rates will go down later in 2024 and end up in the mid-to-low 6% range.
What will CD rates be in 2025? ›
"Shorter CD rates won't collapse and will still offer far higher yields than the ones we experienced in 2021 and prior years," Krumpelman says. "Even in 2025, we expect short CDs to pay more than 3%."
Can you get 6% on a CD? ›
Finding reliable 6% CD rates
You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.
Should I buy a CD now or wait? ›
Waiting to open a CD could mean missing out on some stellar rates. Now, you can lock in high rates on both short-term and long-term CDs and, you can score some serious interest just by opting to deposit a larger lump sum into your CD.
Will interest rates still be high in 2024? ›
Mortgage rates may continue to rise in 2024. High inflation, a strong housing market, and policy changes by the Federal Reserve have all pushed rates higher in 2022 and 2023. However, if the U.S. does indeed enter a recession, mortgage rates could come down.
Will interest rates drop in 2024? ›
The Fed is likely to hold off on cutting rates until later in 2024, with most experts now penciling the first rate reduction for the central bank's September or November meeting, FactSet's data shows.
What will interest rates look like in 2025? ›
The median estimate for the fed-funds rate target range at the end of 2025 moved to 3.75% to 4%, from 3.5% to 3.75% in December.
What is the interest rate forecast for the next 5 years? ›
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
Compare the Highest Jumbo CD Rates
| Institution | Rate (APY) | Minimum Deposit |
|---|
| Quorum Federal Credit Union | 5.35% | $100,000 |
| Credit One Bank | 5.35% | $100,000 |
| Third Federal Savings & Loan | 5.25% | $100,000 |
| CD Bank | 5.25% | $100,000 |
16 more rowsThe Top CDs for Locking Your Rate Until 2025 to 2027
It's possible savings accounts could continue to pay their current peak rates for several more months. But the odds are low that rates on those accounts will be this high in a year, given the forecast of one or more rate cuts from the Federal Reserve in 2024.
How long will CD rates stay high? ›
If you're looking for a safe place to store your savings—and earn a competitive rate so your money can grow faster—it's hard to beat a CD. Interest rates are the highest in about a decade and will likely stay elevated through 2024.
Will CDs go higher than 5%? ›
Yet, ever since the beginning of 2022, the Federal Reserve has taken a firm stance of keeping rates high to tame inflation, increasing short-term borrowing costs up to a range of 5.00% to 5.25%. Correspondingly, you can easily find CDs that pay more than 5% nowadays.
Can you put $100000 in a CD? ›
What is a jumbo CD? A jumbo CD is similar to a regular CD, but it requires a higher minimum deposit. While a typical CD might require a minimum of $1,000 to open, a jumbo CD usually requires a minimum of around $100,000. Because of the high minimum deposit requirement, jumbo CDs don't make sense for a lot of investors.
How much money should I put in a CD? ›
The specific amount you put into a CD depends on your personal finances. The best way to decide how much money to put into a CD is to figure out how much cash you can afford to part with for an extended amount of time. While that amount will be different for everyone, you should keep a few things in mind.
Where can I get 7% interest? ›
7% Interest Savings Accounts: What You Need To Know
- As of April 2024, no banks are offering 7% interest rates on savings accounts.
- Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.
CDs are worth it in 2024 for the right investor. After rate hikes in the past year and a half, many of the best CDs yield well over 5% but these rates may not last for long. For some, it could be worth it to lock in high rates before the Fed starts cutting rates later in the year.
Will CD rates go up or down in the future? ›
Since CD rates are at or near the high we are expecting to see in the near future you may want to consider a CD with a longer term. Rates are expected to drop, so locking in the highest rate for as long as possible may be your best bet to maximize returns.
