Top national 5-year CD rates pay 2.27%
For savers shopping worthy 5-year CD rates, 2016 is playing out as a year of dashed hopes.
Even though the Federal Reserve raised interest rates in December, the top yields for most major CD terms have stagnated, and in some cases they’ve even dropped.
A search through Bankrate's extensive database of the day's best CD rates will show that 5-year yields have been hit especially hard, sitting almost two-tenths of a percentage point lower now than in December.
Fortunately, local deals from credit unions and community banks continue to pay up to three-quarters of a percentage point more than the leading national return — over 3% in one instance.
But when will long-suffering savers finally get to reap some rewards among national offers? It largely depends on the Fed, and we'll tell you what we know.
The top national deals
Today's top 60-month return sits at 2.27% APY, down from the 2.45% APY you could earn at the time of the Fed's hike.
But it's worse than just that drop in the lead, because in December savers could earn 2.10% APY or more from 13 banks.
That has now dwindled to just two banks paying above 2.10% APY.
This could also be a precarious lead, since the leading bank — State Bank of India-Chicago — has a sister institution, State Bank of India-New York, and the two often align their rates.
In August, the New York branch dropped its 60-month yield from 2.27% to 2.14% APY, where it now ranks second.
But in the eight weeks since, the Chicago branch has stuck to its 2.27% APY lead, which puts the top rate high above the term's post-recession low of 1.75% APY, endured in the spring of 2013.
State Bank of India is India’s largest bank, and in the U.S., it operates three independent branches. Each is individually FDIC-insured.
TOP 5-YEAR CD RATES: Nationally Available Bank Deals
|State Bank of India-Chicago||2.27%||$2,500|
|State Bank of India-New York||2.14%||$5,000|
|Federal Savings Bank||2.00%||$10,000|
|Salem Five Bank||2.00%||$10,000|
|First Internet Bank of Indiana||1.92%||$1,000|
Earning more with local deals
Of course, there are always some lucky savers who can outearn the top national rate with certificates of deposit from a community bank or credit union.
These institutions often offer chart-topping yields to savers who live or work nearby or are willing to jump through a hoop or two.
Here are more than a dozen deals that outearn the top national rate, paying qualified savers as much as 3.05% APY on 5-year terms.
One of the credit unions even accepts savers nationwide as members.
TOP REGIONAL 5-YEAR CDS: Credit Unions & Community Banks
|Self Reliance New York Federal Credit Union||New York||$500||3.05%|
|General Electric Credit Union||Ohio, Indiana, Kentucky||$500||2.75%|
|Bank of Utica||New York||$500||2.50%|
|Cove Federal Credit Union||Kentucky||$1,000||2.50%|
|Deere Employees Credit Union||Georgia, Illinois, Iowa, North Dakota, South Carolina, Wisconsin||$500||2.50%|
|American United Federal Credit Union||Utah||$500||2.40%|
|Cottonwood Community Federal Credit Union||Idaho||$500||2.40%|
|Pelican State Credit Union||Louisiana||$500||2.38%|
|Jefferson Financial Credit Union||Louisiana||$10,000||2.38%|
|Latah Credit Union||Idaho||$1,000||2.37%|
|Nebo Credit Union||Utah||$25||2.35%|
|Mountain America Credit Union||Nationwide||$500||2.30%|
|America First Credit Union||Nevada, Utah||$500||2.30%|
Waiting for higher returns
If you think you might qualify for any of these deals, they're worth investigating because they all pay about three times more than the current average 5-year return of 0.81% APY, according to our weekly nationwide survey of banks and thrifts.
The average return bottomed out at 0.77% APY in the summer of 2013 and gradually rose to 0.89% APY in spring 2015. But since the Fed’s hike in December, it's eroded from 0.85% to 0.81% APY.
Rewind to February 2007, before irresponsible mortgage lending led the economy over a cliff. Back then, the national average return for 5-year CDs was 4.02% APY.
But with the financial crisis throwing the economy into a tailspin, the Federal Reserve applied the brakes not only by repressing interest rates to record lows in December 2008 but by keeping them anchored there for seven years.
That historic era in the Fed's timeline officially ended when it made a small rate increase in mid-December 2015.
Although the Fed had indicated it would gradually push interest rates higher over the next several years, global and economic news over the last several months has given the rate-setting committee pause.
Indeed, six of the committee’s eight 2016 meetings have come and gone without any announcement of a further rate increase.
The Fed will next meet November 1-2, but most economists and Wall Street forecasters predict we won’t see Hike #2 until December or even 2017.
It's now clear that it will take two — or even three — hikes to push banks out of this long, dry desert of meager rates.
We hope that eventually does come to pass, as 5-year CD rates could certainly use the boost.
Disclaimer: The rates above were manually gathered on September 26, 2016. Before applying, check with the bank or credit union of interest to confirm the offer still stands.