A rare thing has happened, a bank actually raised their deposit rates. In an environment of ever decreasing rates it’s nice to see one bank, CIT Bank, raise both their CD rates and savings account rates. CIT Bank CD rates had already been some of the best CD rates around for a 12 month CD.

The increase in rates wasn’t significant but what can you expect when the Fed has been holding the Fed Fund’s rate in a targeted range of zero percent to one quarter percent for several years now.

The bank’s 12 month Achiever CD rate went from 1.07% (1.08% APY) to 1.09% (1.10% APY). The 24 month Achiever CD rate was raised to 1.24% (1.25% APY) from 1.19% (1.20% APY). CIT Bank’s Achiever CDs have a minimum opening deposit of $25,000.

CIT Bank’s savings account rate was also increased. The savings rate had the biggest increase of 15 basis points to 1.05% APY, up from 0.90% APY on account balances of $25,000 or more. Savings account balances of less than 25k saw an increase to 0.90% APY from 0.85% APY.

Here is a current listing of CIT Bank CD rates and Savings Rates:

Achiever CD (minimum $25,000 deposit)

• 1 Year CD 1.10 APY
• 2 Year CD 1.25% APY

Jumbo CD (minimum $100,000 deposit)

• 2 Year CD 1.25% APY
• 3 Year CD 1.44% APY

Term CD (minimum $1,000 deposit)

• 6 Month CD 0.45% APY
• 1 Year CD 1.06% APY
• 2 Year CD 1.20% APY
• 3 Year CD 1.42% APY

CIT Savings Rate

• 0.90% APY (minimum to open)
• 1.05% APY ($25,000 to open)

All deposit accounts at CIT Bank are insured by the FDIC for up to $250,000. CIT Bank shouldn’t be confused with Citibank. For more information about CIT Bank’s deposit products and to open an account go to bankoncit.com.

Recent lackluster economic news is putting downward pressure on interest rates. Another weak jobs report last week along with a weaker than expected 1st quarter GDP report combined with worries about Europe’s financial troubles has forced 10 year bond yields below 1.90%. All this negative news will keep downward pressure on deposit rates and current mortgage rates.

The highest CD rates are not that high and won’t be heading higher anytime in the next year. Right now on our 12 month CD rate table the best 1 year CD interest rate is from Doral Bank at 1.14% with an APY of 1.15%. A rate just above 1.00% doesn’t sound that great but it’s higher than the FDIC’s 1 year national average rate of 0.29%. 

CIT Bank is another bank offering 1 year rates considerably higher than the FDIC’s national average. CIT Bank’s current 1 year rate is at 1.07% with an APY of 1.08%. Both these rates are also above the FDIC’s national rate cap of 1.04%.

The FDIC’s rate cap is determined by adding 75 basis points to the national rate. Financial institutions are subjected to interest rate restrictions under Part 337.6 of the FDIC Rules and Regulations. Basically the rates they offer have to stay within 75 basis points of the national average rate.

AloStar Bank of Commerce is on our list with a current 1 year rate of 1.05% with an APY of 1.06%. MetLife Bank and Colorado Federal Savings Bank are tied with the fourth highest rate on our list at 1.04% with an APY of 1.05%.

Ally Bank and EH National Bank round out the top 5 1 year rates. Both Ally Bank’s 1 year rate and EH National Bank’s 1 year rate is at 1.03% with an APY of 1.04%.

Metropolitan National Bank has the sixth best rate at 0.95% with an APY of 0.95%. Rounding out the top 10 banks on our list include Barclays Bank, Discover Bank, E-Loan and First Internet Bank of Indiana all offering a 1 year rate and APY of 0.90%.

Doral Bank Direct, the online banking division of Doral Bank, has the highest CD rate on our list of 12 month certificate of deposit rates. Current CD rates on 1 year CDs at Doral Bank Direct are at 1.14% with an APY of 1.15%.  Doral Bank Direct’s 12 month rate is considerably higher than the current national average rate of 0.78%.

Getting a really good rate on a short term CD is a plus since you’re better off sticking with shorter term CDs right now. The yield curve between short term CDs and long term CDs is flat so going long doesn’t make sense.

To give you an idea of how flat the yield curve is, Doral Bank Direct is offering 18 month and 2 year CDs at 1.14%, the same rate as the 12 month rate.  Some banks are offering longer term CD rates that are on par or even below their shorter term rates.

Doral Bank Direct’s longer term CDs are slightly above the 1 year rate. 3 year, 4 year and 5 year CD rates are all currently at 1.49% with an APY of 1.50%, just 35 basis points above the 1 year rate.

Doral Bank Direct is competitive with their shorter term CDs. Current CD rates on 6 month and 9 month CDs are at 0.75%. That rate is one of the best CD rates around for 6 month CDs and slightly higher than Ally Bank’s 6 month CD rate of 0.74%.

Doral seems to consistently offer some of the highest short term CD rates around. Back in May of last year we reported that Doral Bank Direct CD rates on 12 month CDs were at 1.39% with an APY of 1.40%. At the time the national average rate as reported by Monitor Bank Rates was only at 0.572%.

A year ago the bank was offering 6 month and 9 month rates at 0.75%, the same rate as today. It’s good to see a bank hold CD rates steady these days considering how most banks have been dropping rates the past several years.

The minimum opening deposit for a CD account at Doral Bank is $1,000. You can easily open an account online or print out an application and mail it in.

Since the “Great Recession” economic growth as been slow and interest rates have remained low. The FOMC has kept the Fed funds rate in a targeted range of zero percent to one quarter percent to foster growth. As a result mortgage rates, CD rates and savings rates have all made record lows. You can expect more of the same to the end of 2014.

The Federal Open Market Committee released a statement saying the economy continues to expand moderately and inflation expectations remain stable. In the FOMC’s statement, the committee also believes growth will slow down in the coming quarters and then pick up gradually.

Slow growth, or even moderate growth, and low inflation equals low mortgage rates and deposit rates. If you recently purchased a home or refinanced a mortgage, low mortgage rates have saved you a ton of money. If you live off of interest income from deposits low rates have been an income crusher.

The Fed’s dual mandate of low inflation and maximum employment drives their decision making. The past several years we have seen high unemployment and low inflation, forcing the FOMC to keep the Fed funds rate near zero percent. In fact the FOMC continues to say conditions ”are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014″

Since we are hitting yet another slow patch there is talk of QE3. Quantitative easing (QE) is Fed speak to lower bond yields to help the housing market and foster growth. 

Previous rounds of QE by the Fed including QE1 when the Fed bought $1.25 trillion in mortgage-backed securities and QE2 when the Fed bought $600 billion in long term U.S. Treasuries, all in the name of lowering interest rates.

I personally hoped for stronger growth by now as we are a few years into the current economic expansion. Stronger growth will help the millions of unemployed find work and raise deposit rates. 

Yes, higher interest rates mean higher mortgage rates as well but if we continue to have meager growth people won’t be buying homes so what’s the point of low mortgage rates?

The economic recovery is in full swing in most states. The Bureau of Economic Analysis released State Personal Income which shows an increase on average of 5.1% for 2011. This past year’s increase was better than 2010 when personal income increased 3.7%. The highest increase was in North Dakota at 8.1% and the lowest increase was 3.4% in Maine. Personal income is income received by all persons from all sources.

Personal Income Percent Change from 2010 to 2011:

Earnings, which are only wage earnings, grew an average 4.4 percent in 2011. The increase in wage earnings was in the private sector as state and local government employees saw a decline in average earnings of 0.3%. Civilian federal government wages increased 0.6% in 2011, a lot slower than the 2010 increase of 7.2%

Earnings are now above pre-recession levels in 45 states. Earnings in some states that were hardest hit by the housing bubble are still below pre-recession levels. These states include Arizona, Florida, and Nevada. Two other states still below pre-recession levels are Michigan and Oklahoma.

Inflation is heading higher also, which bodes well for CD rates and savings rates but not mortgage rates. Inflation, which is measured by the national price index for personal consumption expenditures, increased to 2.5% in 2011. The price index increased 1.8% in 2010.

Higher inflation is the key to the Fed raising interest rates which will force deposit rates and current mortgage rates higher. Interest rates have been on a slow decline since 2008. CD rates on 1 year certificates of deposit are averaging 0.37% and savings account rates are averaging 0.17%.  The past several years have been hard on retirees who rely on interest income to live.

During the same time, mortgage rates have declined to record lows which has helped home buyers and homeowners in a position to refinance to a lower refinance rate. Mortgage rates today on 30 year home loans are just above 4.00% and have been in the 4.00% range for all of 2012.