Rates continued to surge in August but savers didn’t see an extra dime in interest. Banks, meanwhile, made out like bandits.
It was a rude change of course from last month, when the cost of borrowing money declined and savers finally enjoyed some non-trivial increases in rates on at least some popular savings products.
This month, however, was another punishing one for consumers, as savings rates remained unchanged (or slipped) and interest rates on loans rose sharply.
Long-term rates started rising six months ago when 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.
Wall Street, it seems, is now convinced that the data are indeed good enough — and the end is nigh. The general thinking in the market is that the Fed will start pulling back on quantitative easing as soon as next month.
That’s touched off a fire sale in the bond market. The yield on the benchmark 10-year Treasury note kicked off the month at 2.56% and leaped as high as 2.9% late last week. Closing out August above 2.8% looks all but certain — and would represent a 75% surge in rates since early May. (Remember that bond prices and yields move in opposite directions.)
That should be helping savers find better rates on products — but it’s not. August, it turns out, was a double-whammy for consumers — and a good time to be a bank. Lenders were able to charge more for loans without shelling out more for deposits.
Money markets — a popular place to stash cash — fell for the fifth straight month despite the action in benchmark Treasury notes. The national average interest rate on a money market account slipped to 0.43% as of Aug. 23 from 0.46% a month ago and 0.47% 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.
Yields on jumbo money market accounts also resumed their downward trend after stabilizing last month. The national average declined to 0.58% as of Aug. 23 from 0.6% in June and July. 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, yields on savings products didn’t budge despite the rising rate environment. Here are the annual percentage yields on some popular savings products as of Aug. 23, according to Bankrate:
- National Average Rate on Interest Checking Account: 0.49%, down from 0.5% a month ago
- Best Rate on No-Fee Savings Account: 0.9% (Barclays [BCS], no minimum), no change for three months
- Best Rate on 1-Year CD: 1.05% (GE [GE] Capital Retail Bank, $25,000 minimum), no change for seven months
- Best Rate on 3-Year CD: 1.40% (Intervest National Bank [IBCA], $2,500 minimum) no change from a month ago
- Best Rate on 5-Year CD: 2.05% (iGObanking.com, $1,000 minimum) no change from a month ago
- Best Rate on 5-Year Jumbo CD: 1.86% (EverBank, $100,000 minimum) no change from a month ago.
At the same time, the most common mortgage and home loan products became substantially more expensive, reversing last month’s trend. Here are the average national rates offered on popular loan products as of Aug. 23, according to Bankrate:
- 30-Year Fixed Mortgage: 4.55%, up from 4.39% a month ago
- 15-Year Fixed Mortgage: 3.57%, up from 3.45% a month ago
- 5/1 Adjustable-Rate Mortgage: 3.44%, no change from a month ago
- 30-Year Fixed Mortgage, Refi: 4.53%, up from 4.38% a month ago
- $30,000 Home Equity Line of Credit: 5.05%, up from 4.96% a month ago
- $30,000 Home Equity Loan: 6.31%, up from 6.04% a month ago