Each month we track the average rates on various deposit accounts. The averages haven’t moved much over the last couple of years. We’re always on the lookout for trends. One trend we’ve seen is a slow rise in 5-year CD rates. For example, one year ago, our average APY for 5-year CDs was 1.21%. That average APY is now 1.28%.
Another trend may be starting. It’s too early to call it a trend, but it’s a noteworthy change. The average rate of internet savings and money market accounts had the largest increase this year. It went up by more than 3% from 0.605% to 0.627% from August to September. This increase was primarily driven by large rate increases at three banks: Palladian Private Bank, Citizens State Bank and ableBanking. All three of these banks now have online savings accounts that are rate leaders.
|1.70%||$250||-||ableBanking||Money Market Savings|
|0.50*%||$50k||-||Citizens State Bank (FL)||Interest Savings|
|OTHER TIERS: 0.10% → $50 - $10k | 0.25% → $10k - $50k|
These large rate increases may be a sign of a growing need for increased deposits. The FDIC's second quarter report that was released in late August indicated quarterly loan growth that was the largest since 2007. Loan growth is a sign of an improving economy, and that's good news for savers since banks will need more deposits to fund new loans.
If this is the start of a trend, we should see further rate hikes, especially at the big internet banks. One of the largest internet banks, Ally, did increase its online savings account rate last week. Another large internet bank, GE Capital, increased its online savings account rate in late July. When we see more of these rate hikes at the large internet banks, we’ll know that this is truly a trend.