The jury may still be deliberating on whether the U.S. economy is in full blown expansion mode or stuck in stasis but, the divergence between CD rates and mortgage rates paints a picture of an expanding economy.

This past week, interest rates were mostly lower across a wide spectrum of fixed income products.  Lower rates were churned out on mortgaged, mid and long term Treasury securities, and corporate bonds for the week ending April 25, 2014.  While rates moved lower on these fixed income instruments, bank CD rates ticked higher.  The significance of higher CD rates is not just the increased returns that will be enjoyed by savers but, it is a market signal that banks are increasing rates to attract depositors.

This may seem like common sense, but banks have kept their CD rates at ultra low levels over the past few years for two primary reasons.  One, interest rates and yields on competing products are also at ultra low levels as seen with the low returns found on money market accounts as well as short term Treasury bills and notes.  Second, banks have been awash in cash and are not in any particular need to attract new depositors with incentives like higher interest rates.  When banks cannot put their funds to work through other investments and loans, bringing in new customers with high yield CDs is a money losing proposition.

The increase in CD rates is seen as step towards banking competition in which the banks delivering the highest CD rates and returns are now competing and increasing rates to continue attracting new customers. 

Rate increases in the long end of the CD yield curve, predominantly five year CDs, is often a reflection on expectations of rising interest rates and inflation in the future.  When midterm CD rates start to rise, banking competition is usually the catalyst for the rate changes especially when the competing market products are not following suit as seen in the current environment with money market rates and Treasury rates.

This past week, the average rate found on the top ten highest bank CD rates ticked up 6/1000ths of a percent.  The average rate coming from the best CDs available nationally moved up to 1.035% from 1.029% from the previous week.  This is not much of jump; however the increase in rates takes place while short term Treasury rates have moved lower.

The top bank CD rates across several different maturities moved higher by 3/1000ths of a percent, measured by the CD rate index.  The average CD rate found on the top term highest CD rates in the CD rate index climbed to 1.093% from 1.090% last week.  Along with rate increases in the one year term certificates, five year CDs also climbed modestly higher as other maturities were unaltered.

The CD rate index measures the top ten highest CD rates on three month CDs, six month CDs, one year CDs, two year CDs, and five year CDs that are available nationally. 

Meanwhile, mortgage rates followed the Treasury market.  The average 30 year mortgage rate available at the nation’s top bank mortgage lenders decreased by roughly six basis points pushing the average rate on this popular home loan product to 4.396% from 4.460% in the prior week. 

Jumbo mortgage rates were lower by almost as much as the 30 year conforming loan with the 30 year jumbo rate dipping just under five basis points to 4.238%.  FHA mortgage rates lagged slightly with a rate cut of less than three basis points which brought the average FHA home loan rate down to 4.088% at the close of the week.

The top credit card rates and savings accounts rates (money market account rates and savings account rates) were unchanged on the week.  The best credit card rates remained at 13.86% and the best savings and money market rates held at 0.887 %.

The weekly bank rate survey provides a detailed report on bank savings rates and lending rates by different consumer rate categories.  The most current survey is for the week ending April 25, 2014.  The weekly rate survey presented the following interest rates and their changes for mortgage rates, CD interest rates, credit card rates, money market rates, savings account rates and Treasury rates.

Bank Rates Market Recap with the Weekly Change in Rates Offered for April 25, 2014

CD interest rates:
Composite CD interest rate index 1.093 percent (up .003 percent) 
3 month CD rates 0.384 percent (unchanged)  
6 month CD rates 0.732 percent (unchanged) 
1 year CD rates 1.035 percent (up .006 percent)  
2 year CD rates 1.178 percent (unchanged)  
5 year CD rates 2.134 percent (up .007 percent) 

Money market and savings account rates:
Bank money market rates and savings account rates 0.887 percent (unchanged)

Mortgage rates:  
30 year mortgage rates 4.396 percent (down .064 percent)  
15 year mortgage rates 3.537 percent (down .045 percent)  
20 year mortgage rates 4.109 percent (down .106 percent)
30 year jumbo mortgage rates 4.238 percent (down .045 percent) 
30 year FHA mortgage rates 4.088 percent (down .025 percent)

Credit card rates:
Credit card rates for new credit card offers 13.86 percent (unchanged)

US Treasury rates:
Six month Treasury rate 0.04 percent (down .01 percent)
One year Treasury rate 0.11 percent (unchanged)
Two year Treasury rate 0.43 percent (unchanged)
Five year Treasury rate 1.72 percent (down .03 percent) 
Ten year Treasury rate 2.68 percent (down .05 percent)

All bank savings rates and lending rates are based on surveys conducted by at the close of April 25, 2014 with all of the interest rates obtained directly from the banks within the survey.  Treasury rates are obtained directly from the Department of the Treasury.  

Additional bank rate data is available to help consumer shop and compare mortgage rates, CD rates and checking accounts for the week ending April 25, 2014 at the following rate tables: 9 month CD rates, 3 year CD rates, 4 year CD rates, 20 year mortgage rates, VA mortgage rates, and the best interest checking accounts .

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