Savers and borrowers caught a break in July for the first time in a long time.
Interest rates leaped over the course of the month — but then cooled off substantially. That helped make the cost of borrowing money cheaper, as rates on a host of popular loan products fell substantially in July. At the same time, savers finally saw some non-trivial increases in rates on at least some popular savings products.
Although rates on savings vehicles are still pathetically low, the trend was in the right direction, especially compared with last month when 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 were supportive of it.
That stoked plenty of anxiety in the market — nervousness the Fed chief worked hard to dispel over the course of July. Once the market realized that any unwinding of the bong-buying program didn’t mean squat for the Fed’s short-term rate policy, interest rates started to ease again.
The yield on the benchmark 10-year Treasury note rose as high as 2.75% at one point during the month, but ended July where it started at 2.59%. The end result was a boost for savers and borrowers at the expense of the banks.
Yes, yields on money markets — a popular place to stash cash — fell for the fourth straight month despite the action in benchmark Treasury notes. The national average interest rate on a money market account slipped to 0.46% as of July 25 from 0.47% a month ago and 0.48% in May, according to data from Bankrate.com (RATE).
As recently as April, the national average stood at 0.49% — a level that money markets were essentially stuck at for nine months.
However, yields on jumbo money market accounts stabilized after three consecutive months of declines. The national average was unchanged at 0.6% as of July 25 to break the downtrend. For some recent context, the average jumbo money market rate stood at 0.62% in March after yielding 0.64% from October through February.
Elsewhere, however, savings rates continued their trend of either remaining stable or — gasp — actually rising. Happily, rates that did increase did so in fairly substantial fashion. Here are the annual percentage yields on some popular savings products as of July 25, according to Bankrate:
- National Average Rate on Interest Checking Account: 0.5%, no change from a month ago
- Best Rate on No-Fee Savings Account: 0.9% (Barclays [BCS], no minimum), no change for two months
- Best Rate on 1-Year CD: 1.05% (GE [GE] Capital Retail Bank, $25,000 minimum), no change for six months
- Best Rate on 3-Year CD: 1.40% (Intervest National Bank [IBCA], $2,500 minimum), up from 1.25% (Barclays, no minimum) a month ago
- Best Rate on 5-Year CD: 2.05% (iGObanking.com, $1,000 minimum) up from 1.76% (EverBank, $1,500 minimum) a month ago
- Best Rate on 5-Year Jumbo CD: 1.86% (EverBank, $100,000 minimum), up from 1.76% (EverBank, $100,000 minimum) a month ago.
At the same time, rates on almost all of the most common mortgage products eased substantially in July, and home loans became less costly too. Here are the average national rates offered on popular loan products as of July 25, according to Bankrate:
- 30-Year Fixed Mortgage: 4.39%, down from 4.51% a month ago
- 15-Year Fixed Mortgage: 3.45%, down from 3.57% a month ago
- 5/1 Adjustable-Rate Mortgage: 3.44%, up from 3.37% a month ago
- 30-Year Fixed Mortgage, Refi: 4.38%, down from 4.51% a month ago
- $30,000 Home Equity Line of Credit: 4.96%, down from 4.99% a month ago
- $30,000 Home Equity Loan: 6.04%, down from 6.16% a month ago