CD rate forecast: 2024 The Fed kept its rate the same after its first meeting of 2024 on Jan. 30-31. Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate as soon as March, according to the CME FedWatch Tool on Jan. 31.
Short-term CD rates are unusually high right now, but they could drop throughout the year. Long-term CDs could enable you to secure a higher interest rate for years to come. If you're not comfortable locking your money up for a while, a CD probably isn't right for you.
The U.S. Federal Reserve is currently expected to cut interest rates by a little more than 1% over the course of its seven remaining scheduled meetings of 2024. This may leave short-term interest rates at approximately 4% by December 2024, based on market forecasts.
Why it's probably time to buy a CD. It's unlikely that CD rates will continue to climb any higher. Now, you can lock in high rates on both short-term and long-term CDs. Waiting to open a CD could mean missing out on some stellar rates.
The Fed's forecast projects a median federal funds rate of 3.6% in September 2025 — a full percentage point lower than the forecast for September 2024.
You can get 6% on a CD by becoming a member of a credit union offering a certificate with this rate.
Here's a quick comparison: From mid-December 2023 to late January 2024, the average one-year CD rates at 15 online banks dropped from about 5.50% to 5.25% annual percentage yield, according to a NerdWallet analysis. While not drastic, more rate drops may be coming.
CD Rates Forecast 2024
While the federal funds rate had been steadily climbing for a couple of years, the CME FedWatch Tool, which measures market expectations for the fed fund rate changes, shows that most expect rates to fall between 4% and 4.75% by the end of 2024.
While we don't yet officially know when, and by how much, interest rates could drop in 2024, it's safe to say we've reached peak savings rates today and now is the time to lock one in with a CD.
Mortgage Bankers Association (MBA).
MBA's baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
Experts have forecasted that mortgage rates will go down in 2024, but exactly when they'll start trending down depends on the economy and when the Federal Reserve starts lowering the federal funds rate.
Right now, experts still believe mortgage rates will go down in 2024 and 2025.
There aren't any traditional banks offering a 7% interest savings account in the U.S., but you will find some credit unions that offer checking accounts and certificates with rates near or above 7.00% APY. It's important to note that savings account rates are variable and can change at any time.
During the Great Recession and its aftermath, the stock market went through turbulent shifts, resulting in great losses for some stockholders. CDs are one option that can help protect your investment from times of turmoil by providing a stable income.
The average yield on a one-year CD in December 2023 was 1.86%, according to the Federal Deposit Insurance Corporation (FDIC), while a 60-month CD was 1.40%. While those rates aren't exactly robust, they're well above recent levels.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
Minimum and maximum amounts for CD investments
You can expect a minimum CD opening deposit of at least $500 at most banks, though that could rise to $2,500 or more for certain accounts. For example, CIT's Jumbo CDs require a minimum balance of $100,000. CDs with higher minimums often pay higher APYs.
Finally, don't be afraid to negotiate with your current bank or credit union for a better CD interest rate. They may be willing to offer you a higher rate to keep your business, especially if you have a good credit score, a long-standing relationship with them or a large sum of money to deposit.
However, federally insured banks and credit unions only insure up to $250,000 per depositor per account ownership category. If you put more than this amount in a single CD, some of your money will be at risk. You can still safely invest more than $250,000 in CDs by opening accounts at multiple financial institutions.
Numerous banks offer 5% APY on CDs, including but not limited to BMO Alto, CIBC Bank USA, and NASA Federal Credit Union.
What was the highest CD rate historically? According to the Federal Reserve, the highest CD rate was for a three-month CD term in December 1980, which reached an average of 18.65%.
American 1 Credit Union is currently offering 6% CD with a one-year term. There's a $1,000 minimum deposit, and this credit union makes membership eligibility easy. You only need to join its affiliated nonprofit for a $3 fee, open a savings account and deposit at least $5.
Mortgage rates are going to stay above 6% through 2025, according to estimates from Goldman Sachs. Goldman said the decline in mortgage rates should offer marginal improvements in housing affordability. The average 30-year mortgage rate fell to 6.62% last week after hitting a cycle-high of 7.8%.