Top 5-year CD rates stage modest rebound
Although we won't see significant improvements in CD yields until the Federal Reserve finally kicks off a period of rate hikes, 5-year returns benefited from a series of modest increases this summer.
The current leader among nationally available 5-year bank certificates is E-Loan’s 2.45% APY, which stands a full two-tenths of a percentage point above four second-place banks paying 2.25% APY.
It’s also the best sustained national 5-year yield we’ve seen since September 2011, when returns plummeted below 2.50% APY and later descended to a post-recession low of 1.75% APY by May 2013.
(Yes, Live Oak Bank paid 2.50% APY last February. But that deal lasted all of four days and was so short-lived it barely counts.)
After that low point, 5-year rates climbed for the better part of a year but then frustratingly yo-yoed between 2.25% and 2.35% APY for 17 months in 2014 and 2015.
Enter E-Loan in July, whose top-billed rate is the result of a dramatic change in rate policy by its parent company, Popular Community Bank.
Banking experts tell us Popular Community – which operates almost 50 branches in New York, New Jersey and South Florida – is a healthy, on-the-rise bank that’s enjoying robust growth in commercial lending and therefore needs to grow its deposit reserves to support those loans.
To attract deposits, E-Loan is now offering not just the top national 5-year return, but the leading rate on 1-, 2-, 3- and 4-year CDs as well.
TOP 5-YEAR CD RATES: Nationally Available Bank Deals
|Capital One 360||2.25%||No minimum|
|First Internet Bank of Indiana||2.17%||$1,000|
|Northwest Community Bank||2.17%||$1,000|
|State Bank of India - Chicago||2.12%||$2,500|
|State Bank of India - New York||2.12%||$5,000|
|Salem Five Bank||2.10%||$10,000|
|Sallie Mae Bank||2.10%||$2,500|
|State Farm Bank||2.10%||$500|
|American Heartland Bank & Trust||2.05%||$1,000|
|North American Savings Bank||2.02%||$1,000|
|Ally Bank||2.00%||No minimum|
|GE Capital Bank||2.00%||$500|
|Gulf Coast Bank & Trust||2.00%||$2,000|
|Hudson City Savings Bank||2.00%||$500|
Fortunately, there are always some lucky savers who can outearn the top national rate by purchasing CDs 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.
Among the best local and regional offerings are 5-year CDs currently paying up to 3.05% APY.
TOP 5-YEAR CD RATES: Credit Union, Community Bank Deals
|Self Reliance New York Federal Credit Union||New York||3.05%|
|Four Corners Federal Credit Union||New Mexico, Arizona, Colorado, Utah||2.78%|
|General Electric Credit Union||Ohio, Indiana, Kentucky||2.75%|
|Deere Employees Credit Union||Illinois, Iowa||2.65%|
|Grand Rivers Community Bank||Illinois||2.65%|
|IH Mississippi Valley Credit Union||Illinois, Iowa||2.63%|
|Green Mountain Credit Union||Vermont||2.53%|
|Indiana Members Credit Union||Indiana||2.53%|
|Bank of Utica||New York||2.50%|
|City Credit Union||Texas||2.50%|
|Cove Federal Credit Union||Kentucky||2.50%|
|Kemba Credit Union||Ohio, Indiana, Kentucky||2.50%|
|Mid-Atlantic Federal Credit Union||Maryland||2.50%|
|Texasgulf Federal Credit Union||Texas||2.50%|
|Ukrainian Selfreliance Federal Credit Union||Pennsylvania, New Jersey||2.50%|
|Vibe Credit Union||Michigan||2.50%|
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 0.86% 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 early this spring. But since May, it’s wavered between 0.86% and 0.87% APY.
Rewind to February 2007 — before irresponsible mortgage lending led the economy over a cliff and the Fed stepped in to boost the economy with a policy of repressed interest rates — and the national average return for 5-year CDs was 4.02% APY.
While that kind of yield is hard to imagine in the rate climate we’ve been suffering for years now, it’s a reasonable return for savers to expect when you look at rate histories before the financial crisis.
We had hoped the Fed would finally launch its series of interest rate hikes at its meeting last week. But we’ve been left waiting until at least its next meeting, scheduled for late October. It’s also quite possible the committee will hold off until December.
Whenever that day comes, CD rates in all terms will gradually begin improving, and 5-year yields can certainly use the boost.