Bank Rates Bottom Out

NEW YORK (MainStreet) – The good news is that falling interest rates on savings at your local bank seem to have hit bottom. The bad news is that they might stay there for a long time yet.

National bank rate averages provided by RateWatch for November show that once again deposit rates have fallen across the board, with interest rates on certificates of deposit for 12, 36, 48 and 60 months all down by the end of the month. 

Compared to prior months, the rate of decline has slowed, which is good news for anyone looking for a safe place to put their savings. Twelve-month CDs fell a single basis point in the month of November, 36- and 48-month CDs fell by only two basis points, and 60-month CDs fell by just three basis points. By comparison, the average 36-month CD fell by 21 basis points from the end of July to the end of October, an average decline of seven points per month.

Things also seem to be stabilizing on the loan side. While interest rates on personal unsecured loans and five-year adjustable rate mortgages fell five and six basis points, respectively, home equity and new auto loans saw zero change from the previous month. 

“Rates have definitely stabilized,” confirms Mike Moebs, CEO of Moebs Financial Services.

Taken together, that means the interest rate climate got only very slightly better for consumers in November, but reduced volatility is a step in the right direction.

A bit of bottoming out was expected after deposit rates began to fall precipitously in August, a decline sparked by the Federal Reserve Bank’s announcement that it planned to keep interest rates low through at least mid-2013. So can we now expect rates to start climbing back up, or will Fed policy continue to depress bank rates throughout 2012?

“They’re going to stay that way for at least a year,” predicts economist Lance Roberts, CEO of Houston-based investment management firm Streettalk Advisors. “What you’d need to see [for rates to rise] is a very strong rebound in the real underlying economics.” He adds that the recent decrease in the unemployment rate doesn’t constitute any significant turnaround, as it largely shows that more people are dropping out of the job market rather than getting jobs.

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