Top 5-year CD rates stuck in neutral so far this year

White piggy banks with stacks of money and moneybag

Five-year CDs are still stuck in a rut so far this year.

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
Synchrony Bank 2.25% $25,000
CIT Bank 2.20% $1,000
First Internet Bank 2.12% $1,000
State Bank of India — Chicago 2.12% $2,500
State Bank of India — NY 2.12% $5,000
American 2.10% $500
Discover 2.10% $2,500
Sallie Mae 2.10% $2,500
Ally 2.00% No minimum
BBVA Compass 2.00% $500
GE Capital Bank 2.25% $500
SalemFive Direct 2.00% $10,000

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.
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.
CIT Bank The online consumer bank of CIT Group Inc., which offers financing to small businesses and middle-market companies.
First Internet Bank An online bank located in Indianapolis.
State Bank of India-Chicago The FDIC-insured Chicago branch of India's largest bank, which operates independently of other U.S. branches.
State Bank of India-NY The FDIC-insured New York branch of India's largest bank, which operates independently of other U.S. branches.
American Which operates an online portal and a single branch in Allentown, Pennsylvania.
Discover Bank An online bank owned by the credit card company.
Sallie Mae An online bank owned by the student lender.
Ally An online bank based in Charlotte, North Carolina.
BBVA Compass An online bank based in Charlotte, North Carolina.
GE Capital Bank An online bank owned by GE Capital Corp., the financial services unit of the manufacturing company.
SalemFive Direct The online division of Salem Five Bank, which has 29 branches just north of Boston.

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
General Electric Credit Union 2.50% Ohio, Kentucky, Indiana
Vibe Credit Union 2.50% Michigan
Red Rocks Credit Union 2.38% Colorado
Citizens State Bank 2.35% Florida

The national average return on 5-year CDs is still well below 1% — 0.89% 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 2007, before irresponsible mortgage lending led the economy over a cliff, the average return on 5-year CDs was around 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 under $480 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 still sat at only 0.687% in March.

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 now the nation's bank-for-banks has dropped both phrases from its policy guidance and could start raising the federal funds rate as early as June, although later this year seems more likely.

The most recent official 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.