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Certificate of Deposit Rates End 2014 on a High Note and Will Move Higher in 2015

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Banks are gearing up for a higher federal funds rate in 2015 by increasing certificate of deposit rates now. We have been reporting on the increase in CD rates the past several months as banks slowly upped their rates. The increases are nominal and will continue to be so until the fed funds rate is increased.

The best 1 year certificate of deposit rate this week remains the same at 1.16 percent with an APY of 1.17 percent from Bank Direct. More banks have increased their rates but a new high hasn't been made on the 1 year certificate of deposit rate list this week.

Sallie Mae Bank recently increased their 1 year certificate of deposit rate to 1.14 percent with an APY of 1.15 percent. That rate ties them for the second best rate with CIT Bank and My e-BAnC by BAC Florida Bank. Pentagon Federal Credit Union also recently increased their 1 year certificate rate to 1.10 percent with an APY of 1.11 percent.

There are now 16 banks and credit unions currently offering 1 year certificate of deposit rates at or above 1.00 percent. In 2015, we expect more financial institutions to increase their rates. We also expect both short term and long term CD rates to make new highs next year. How high the fed funds rate is increased will determine how high CD rates increase.

1 year CD interest rates will definitely move above 1.50 percent and there is a strong likelihood that some banks will increase rates above 2.00 percent. Exactly when rates are increased is debatable but the probability of an increase gets greater as the year progresses. If you have a certificate of deposit maturing sometime over the next 6 months, you should roll it into a short term certificate of deposit.

This is especially true if you have a long term CD account maturing - you don't want to look into another long term CD at current low rates. The best 5 year rates available right now are around 2.25 to 2.50 percent. By the end of 2015, we could see the best CD rates on 1 year certificates of deposit in that range.
Author: Brian McKay
December 31st, 2014