Top 5-year CD rates disappoint in early 2015

White piggy banks with stacks of money and moneybag

So far this year, 5-year CDs remain stuck in a rut.

The top nationally available rate has jumped as high as 2.5% APY for a few days, or 2.3% for a couple of weeks.

But in the end, it's always fallen back to 2.25% APY, which is pretty much what the best deals were paying last spring.

The only good spin we can put on this tepid performance is that the best national deals are paying more than they did in late 2012 and the first half of 2013, when rates bottomed out at 1.80% APY.

You can also find a few community banks and credit unions offering local deals paying as much as 2.50% APY (more on that later).

But whatever nascent recovery we thought we were seeing in 60-month CDs seems to have stalled as everyone waits for the Federal Reserve's plan to start pushing interest rates up sometime this summer or early fall (more on that later, too).

TOP 5-YEAR CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
Barclays 2.25% No minimum
GE Capital Bank 2.25% $500
Synchrony Bank 2.25% $25,000
CIT Bank 2.20% $1,000
First Internet Bank of Indiana 2.12% $1,000
State Bank of India — Chicago 2.12% $2,500
State Bank of India — NY 2.12% $5,000
Discover 2.10% $2,500
Nationwide 2.10% $500
Sallie Mae 2.10% $2,500
EverBank 2.02% $1,500

To qualify for this list, a bank must be FDIC-insured and allow savers from all 50 states to buy its certificates of deposit online or through the mail.

Click here to search Bankrate's database for all of the best nationally available CD rates.

Our CD calculator will help you figure out the interest you'll earn for any term, amount and interest rate.

TOP 5-YEAR CD RATES: About The Banks

Bank Description URL
Barclays The online American operation of the worldwide British bank with more than $2 trillion in assets. www.banking.barclaysus.com
GE Capital Bank An online bank owned by GE Capital Corp., the financial services unit of the manufacturing company. gecapitalbank.com
Synchrony Bank Formerly known as GE Capital Retail Bank, this predominately online bank is managed by General Electric and has a single branch in Bridgewater, N.J. www.myoptimizerplus.com/
CIT Bank The online consumer bank of CIT Group Inc., which offers financing to small businesses and middle-market companies. www.bankoncit.com
First Internet Bank of Indiana An online bank located in Indianapolis. www.firstib.com
State Bank of India-Chicago The FDIC-insured Chicago branch of India's largest bank, which operates independently of other U.S. branches. www.sbichicago.com
State Bank of India-NY The FDIC-insured New York branch of India's largest bank, which operates independently of other U.S. branches. www.statebank.com
Discover Bank An online bank owned by the credit card company. www.discover.com
Nationwide Bank An online bank owned by Nationwide Mutual Insurance Company and its affiliates. www.nationwide.com
Sallie Mae An online bank owned by the student lender. www.salliemae.com
EverBank An online bank owned by Nationwide Mutual Insurance Company and its affiliates. www.everbank.com

The failure of national rates to post significant and lasting gains means there’s a better chance that a community bank or credit union near you is offering a better return on 5-year CDs.

It's true that these rates are only available to savers who live and work in a limited area or specific industry, but they're well worth searching out.

For example, City Credit Union, General Electric Credit Union and Vibe Credit Union all offer returns of 2.50% APY.

TOP 5-YEAR CD RATES: Local Deals

Bank/Credit Union (APY) State Contact
City Credit Union 2.50% Texas www.citycu.org
General Electric Credit Union 2.50% Ohio, Kentucky, Indiana www.gecreditunion.org
Vibe Credit Union 2.50% Michigan www.vibecreditunion.com
Citizens State Bank 2.35% Florida www.citizensstate.net
Lower Valley Credit Union 2.27% Washington www.lvcu.org

The national average return on 5-year CDs is still well below 1% — 0.88% APY in our most recent survey.

That's not much higher than the record-low yield of 0.77% APY, a rate last reached in July 2013.

Back in February 2007, before irresponsible mortgage lending led the economy over a cliff, the average return on 6-month CDs was 4% APY.

By most historical standards, that’s a reasonable rate for savers to expect.

But to rescue the economy from its worst crisis since the Great Depression, the Federal Reserve drove short-term lending (and therefore savings) rates to record lows.

It did that by drastically reducing what’s called the federal funds rate — the interest commercial banks are charged to borrow money from each other through the Fed.

Since it’s been essentially zero since December 2008, banks have been able to get pretty much all of the money they need for loans through the Fed for essentially nothing.

When the banks didn’t need our deposits, they slashed rates. Savers responded by yanking money out of CDs, with those deposits falling $1.45 trillion dollars in early 2009 to just over $500 billion today.

One measure of how little savers are being paid is the Cost of Funds Index compiled by the Federal Home Loan Bank of San Francisco. It asks banks in California, Arizona and Nevada how much they’re actually paying for deposits.

The index hit a record low of 0.663% in September, and even though it has risen slightly since then, still sat at only 0.700% in February.

In late 2008, before the Feds lowered the federal funds rate to zero, it was almost four times higher at 2.757%.

Over the past six years, the Fed’s rate-setting committee regularly issued statements saying it expected to keep interest rates near zero for “a considerable time,” or, more recently, that it would be "patient" about raising rates.

But this year, the nation's bank-for-banks has dropped both phrases from its policy guidance.

Now, almost everyone expects the Fed will finally start pushing rates higher as early as June and no later than this October.

A recent survey of the 17 Fed governors shows they expect the federal funds rate to be just below 1% by the end of this year, just below 2% by the end of 2016 and to reach their ultimate target of 3.75% sometime in 2018.

Contributing editor Sabrina Karl provided research and analysis for this report.