June has been a tough month for both borrowers and savers.
In case you’ve been unconscious in a cave on Mars, we have a news flash for you: Long-term interest rates have gone vertical lately, spooked by Federal Reserve talk about pulling back on its $85 billion-a-month bond-buying program, also known as quantitative easing.
That made borrowing money a lot more expensive, as rates on a host of popular loan products rose sharply in June. At the same time, savers saw little relief from ultra-low rates on money markets and other products.
Indeed, rates on many savings vehicles actually declined in June. That’s right: Things actually got worse for holders of cash.
Long-term rates started rising in late May after Federal Reserve Chairman Ben Bernanke said the central bank could start tapering its bond-buying program sooner rather than later — if economic data was supportive of it.
That stoked plenty of anxiety in the market — nervousness the Fed chief did nothing to dispel with his latest policy statement. Rosier economic projections from the central bank and a dismissive attitude toward the possibility of deflation sparked a stampede out of the bond market. The yield on the benchmark 10-year Treasury note leaped to 2.55% (and has spiked much higher in intraday trading), up from 2.01% a month ago.
That’s more than a 25% jump in yields in less than a month, with most of the damage coming in just the past week. The rally in yields is even more dramatic when you consider that as recently as early May, the 10-year was throwing off as little as 1.6%.
The net result was that interest rates tipped decisively in favor of lenders.
Yields on money markets — a popular place to stash cash — fell for the third straight month despite the rise in benchmark Treasury notes. The national average interest rate on a money market account slipped to 0.47% as of June 24 from 0.48% a month ago, according to data from Bankrate.com.
As recently as April, the national average stood at 0.49% — a level that money markets were essentially stuck at for nine months.
Meanwhile, yields on jumbo money market accounts also slipped for a third straight month after a five-month period of not budging. The national average dropped to 0.6% as of June 25 from 0.61% a month ago, continuing its downward trend. As for jumbo money markets, rates stood at 0.62% in March after yielding an average of 0.64% from October through February.
Elsewhere, savings rates were either unchanged or barely — barely — ticked up. Here are the annual percentage yields on some popular savings products as of June 24, according to Bankrate:
- National Average Rate on Interest Checking Account: 0.5%, down from 0.51% a month ago
- Best Rate on No-Fee Savings Account: 0.9% (Barclays [BCS], no minimum), no change from a month ago
- Best Rate on 1-Year CD: 1.05% (GE [GE] Capital Retail Bank, $25,000 minimum), no change for five months
- Best Rate on 3-Year CD: 1.25% (Barclays [BCS], no minimum), down from 1.35% (Barclays, no minimum) a month ago
- Best Rate on 5-Year CD: 1.76% (EverBank, $1,500 minimum), up from 1.75% (Barclays, no minimum) a month ago
- Best Rate on 5-Year Jumbo CD: 1.76% (EverBank, $100,000 minimum) up from 1.75% (CIT Bank [CIT], $100,000 minimum) a month ago.
At the same time, rates on the most common mortgage products jumped substantially higher in June, and home loans were mostly pricier too. Here are the average national rates offered on popular loan products as of June 24, according to Bankrate:
- 30-Year Fixed Mortgage: 4.51%, up from 3.75% a month ago
- 15-Year Fixed Mortgage: 3.57%, up from 2.9% a month ago
- 5/1 Adjustable-Rate Mortgage: 3.37%, up from 2.68% a month ago
- 30-Year Fixed Mortgage, Refi: 4.51%, up from 3.74% a month ago
- $30,000 Home Equity Line of Credit: 4.99%, up from 4.98% a month ago
- $30,000 Home Equity Loan: 6.16%, down from 6.17% a month ago