Rate Trends - Savings Account Rates Reach 5-Year High

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The fourth Fed meeting of 2018 has started today. The FOMC statement should be released on 2:00pm Wednesday. A rate hike is expected which will move the target federal funds rate range to 1.75% - 2.00%. A Fed rate hike on Wednesday would be the second rate hike this year and the seventh rate hike since the Fed began normalizing rates in December 2015. After Wednesday, at least one more Fed rate hike (and possibly two more) is likely for 2018. How will this affect deposit rates? To help answer that question, we did an analysis of our proprietary banking data with a focus on savings account rates.

Interest rate data collected from savings accounts from 6,905 banks and credit unions show that savings account rates have reached a 5-year high. This is shown in the following graph.

The above graph shows the rate trends of the average savings account yields. This is an interactive graph. You can choose the look-back period (from 3 months to 5 years).

As you can see in the graph, the average savings account yield has finally reached a five-year high. The average is dominated by brick-and-mortar banks and credit unions. Thus, the average is still low compared to internet savings account rates. Below are three things to note from this graph:

  • The average savings account yield for June 2018 is 0.216%. This exceeds the average from June 2013 of 0.203%.
  • In the last five years, the average savings account yield reached its low of 0.177% in December 2016, around the time of the second Fed rate hike.
  • Since December 2016, the average savings account yield has increased by 22%. During this time, there have been four additional Fed rate hikes.

Internet savings account yields have increased much faster than brick-and-mortar savings account yields. Since December 2016, the average internet savings account yield has increased from 0.722% to 1.179%, an increase of 63%.

In December 2016, the top yield for a nationally-available savings account was 1.30% APY (promotional rate from Palladian PrivateBank which is now CIBC Bank USA.) As of June 12, 2018, the top yield is 2.26% APY, an increase of 74% (The 2.26% APY is a brand new promotion from Northern Bank Direct.)

To review the top Savings and Money Market rates, both nationwide and state specific, please refer to our Savings Account rates table and Money Market Account rates table.

Related Pages: banking tools and data

Comments


#1 - This comment has been removed for violating our comment policy.
gregk
gregk   |     |   Comment #3
Struggling to grasp the intended insight here. Over the course of 7 Fed rate hikes the average savings account yield has increased by a bit more than one hundredth of one percent, and a handful of internet banks have raised rates somewhat more generously if still modestly. Not sure that makes for a notable story. Sometimes data is just data.
buckeye61
buckeye61   |     |   Comment #4
The numbers are not helped by the "Mega Banks" who have decided not to raise deposit rates regardless of FED rate increases. If demand for loans increase we could see a faster pace of rising Savings and CD rates. I'm not holding my breath!
DCGuy
DCGuy   |     |   Comment #5
If interest rates rises, demand for loans usually declines because the cost of borrowing becomes less attractive. Then that puts a damper on interest rates.
gregk
gregk   |     |   Comment #6
MegaBanks obtain virtually all their deposits from two distinct sources, - first a relatively small but still significant coterie of the very rich, who seek a safe place to store their loot where FDIC insurance becomes meaningless, and second from hundreds of thousands of "small ball" checking account customers whose individual assets with the bank are typically modest (even if collectively huge). Neither of these groups cares much about interest, which gives the FI's little incentive to pay more than the minimal amount.they do.
the little hands club
the little hands club   |     |   Comment #14
I think some here think they are in the club of the coterie but out of this forum ARE small ballers
deplorable 1
deplorable 1   |     |   Comment #7
I think the point is that rates have finally risen enough that even the average savings account has rounded the curve from the lows. This is fairly significant because it shows that most banks have now raised their rates.
gregk
gregk   |     |   Comment #9
According to Ken's graph the average savings account rate has increased b slightly more thany .01% over the last 5 years, - a barely perceivable "rounding of the curve" it seems to me. You honestly find this "fairly significant" in a positive way? What it would seem to portend if consistency be maintained is that 7 Fed rate hikes from now (assuming that many more happen) the average savings account rate will by then have risen by another .01%. How encouraging.
deplorable 1
deplorable 1   |     |   Comment #10
It's only the savings accounts that are just now rounding the curve. It is significant because now ALL types of savings averages are up from the lows. CD's, MMA's and online banks rounded the curve a while back. I would not project that small of a rate hike in the future though because they have just started to move off the lows after 0% for 8 years. Not to mention these are just averages which are always low anyway just ask any rate chaser.
deplorable 1
deplorable 1   |     |   Comment #8
Since banks seem to be slower than usual in passing FED hikes along to us savers I'm hoping that we will soon see a significant spike in inflation. I know a lot of folks don't like this but if you want to see decent savings account/CD rates again and a widening yield curve the FED needs a inflationary kick in the pants to get things moving again. I also don't think the general public is even aware that you can now get 2.26% on liquid cash or 3.01% on a 2.5 year CD. Once people actually realize how much they are losing out on and start moving their money to higher yielding accounts competition should kick in and take care of the rest. The question is how to get old folks, millennial's and the rest of the clueless masses to wake up and take action.
Anon
Anon   |     |   Comment #11
Some economists are predicting an acceleration of inflation in the 2H2018. This would increase pressure on the Fed to raise rates and give us even better CD and savings account rates. Although I've taken advantage of some of the recent 1-2 year CD deals, I'm keeping some money liquid at places like Northpointe Bank and Northern Bank Direct in case this pans out.
deplorable 1
deplorable 1   |     |   Comment #15
Same here Anon. I was predicting higher inflation a while back and it does look to be picking up a bit lately. The FED has already altered their dot plot slightly higher. Now just imagine what a large inflationary spike would do.
111
111   |     |   Comment #12
This article is almost entirely about "average savings account rates". Yes, the average savings account rate has increased slightly more than .01% over the last 5 years - not much. But personally, I think the bigger story is that the "spread" between the rates of the top tier of savings accounts (say, the upper 3%, just to pick a number) versus those average rates, has widened considerably during that same timeframe. Was a Federally-insured 2.26, or even a 1.90 or a 1.85 rate, available 5 years ago? Not that I saw, anyway.

To those of us who frequent this website, I think the spurt in top-tier rates versus the average rate is frankly more important than the slowness of the rise in average rates. It's more important from a practical standpoint, at least, in terms of making money safely. Sadly, those banks paying average (or below-average) rates - the megabanks, etc. - are often ALSO the "usual suspects" who take advantage of their customers in other ways as well - nickel-and-diming, punitive fees, etc. Aside from credit cards, I have almost no accounts with those banks, except every once in a while when they offer bonus promotions.
gregk
gregk   |     |   Comment #13
Agreed 111. Average rates are meaningless (which is why I questioned the purpose of Ken highlighting immaterial changes in those rates over the last 5 years as he did). No one cares.
As you suggest, it's the "leading-edge" rates that matter, and we can all salute Ken for so excellently keeping us abreast of them. Just sometimes his wonky side takes over a little too much (like with the above) and he feels the need to graph out in some summarizing fashion all the voluminous data he's accumulated, but that doesn't end up being very useful. It's OK.
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