As mortgage rates stall, banks are still paying high rates for your cash
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- The Fed's rate cut in September impacted rates on mortgages and interest-earning bank accounts.
- Mortgage rates declined in anticipation of the Fed's rate cut, but have risen since.
- High-yield bank account rates remain high, despite small rate drops, which is good for savers.
Last month, the Federal Reserve cut rates by 50 basis points — a substantial amount after waiting for inflation to ease.
When the Federal Reserve cuts rates, it indirectly influences rate declines in banking products, like mortgages and interest-earning bank accounts. As the first cut in four years, though, mortgage and bank account rates have remained high overall despite it being a turning point for the Fed.
While that may not be the best news for eager homebuyers, it also provides the opportunity for savers to keep earning good rates for a bit longer. We'll explain how to navigate your financial goals in the current economic environment, whether you are planning on buying a home or growing your cash in a checking account, savings account, or CD.
Mortgage rates are still high but it still may be worth buying a house
Mortgage rates fell in anticipation of the Fed's rate cut, but now, in the last month, current mortgage rates have risen back up a little bit. According to Freddie Mac data, 30-year mortgage rates are still in the 6% range.
The mortgage forecast following the last Fed meeting indicates more rate cuts are potentially on the horizon, but it will largely depend on how the Fed views the current economic environment. Ultimately, it will likely take time to see significant changes in mortgage rates.
If you're wondering whether to buy a home or wait, it'll likely depend on your financial circumstances and whether you find a good fit. If you're financially ready and have found what you're looking for, it could be a good time to buy a home following September's Fed rate cut. Mortgage rates are still lower than they were at the beginning of 2024 and even most of 2023, and you'll be up against less competition.
High-yield checking accounts pay up to 7% APY and may benefit big spenders
The best high-yield checking accounts haven't seen much rate movement after the Fed meeting.
Genisys Credit Union and OnPath Credit Union offer some of the highest rates available and let you join by becoming member of a foundation. Genisys Credit Union Genius High Yield Checking pays up to 6.75% APY and OnPath Rewards High-Yield Checking offers up to 7.00% * APY.
Earning interest on a high-interest checking account tends to be more complicated than with high-yield savings accounts or CDs, though. You usually need to meet certain requirements to earn the highest APY, like making debit card transactions or maintaining a certain account balance. That's why high-yield checking accounts tend to be the best fit for people who maintain a good checking account balance and regularly use their debit card to make transactions.
High-yield savings accounts grow savings easily and offer up to 5.50% APY
The best high-yield savings accounts pay between 4.30% APY to 5.50% APY, with smaller online banks providing the most competitive offerings.
A high-yield savings account is a great place for building an emergency fund. It can also be a good spot for saving goals you hope to accomplish in less than five years — for example, a vacation or a house downpayment.
In the same way that mortgage rates are changing incrementally, savings account rates are adjusting. The savings rate forecast for 2024 shows that savings account rates are likely going to decline further in 2024 and heading into 2025. However, the pace of rate movement is dependent on the Fed's movement toward rate cuts.
You should still consider opening a high-yield savings account regardless of economic conditions because these accounts offer higher rates than average savings account interest rates.
CDs could be advantageous for earning 5% on your savings for months longer
CDs are another option for savings goals. They offer the advantage of a fixed interest rate, which could be beneficial in a declining interest rate environment, but you have to keep your money in the account to earn interest. Otherwise, you'll be charged an early withdrawal penalty for taking out money before maturity.
The CD rate forecast for 2024 indicates that CDs will likely get less competitive over time. The longer you wait, the less chance you'll have of locking in some of the last 5% interest CDs. You could also build a CD ladder to avoid the risk of early withdrawal.
Business Insider's personal finance team monitors over 100 national banks and credit unions to find the best CD rates. Here are some of the highest CD rates still available:
- Dow Credit Union 3 Month Simple CD: 5.00% APY
- Newtek Bank 6 Month CD: 5.25% APY
- The Federal Savings Bank Promotional 1 Year CD: 4.60% APY
- EagleBank 18 Month CD: 4.71% APY
CDs with terms of 2 years or more currently pay lower rates than ones 18 months and shorter. The top rates for long-term CDs are close to 4% APY, but keep in mind that your rate will be locked in for longer, which could give you an edge depending on the pace the Fed cuts rates.