What are the CD rates at Berkshire Bank?

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The Federal Reserve keeps hiking interest rates. Mortgage rates are on the rise, and so are interest rates on credit cards. But what about the interest rates on certificates of deposit?

They’re going up, too, but forecasters say savers should keep their expectations in check.

“In the 1980s, CD rates were as high as 15% or more. It is difficult to imagine that we would reach that level again,” says Tenpao Lee, professor emeritus of economics at Niagara University in upstate New York.

Average CD Rates Right Now

In mid-January, the typical APY, or annual percentage yield, for a one-year CD sat at a mere 0.13%—a pandemic low, according to FDIC data. By mid-September, the average had climbed to 0.60%.

Over the same eight-month period, there were similar increases for other CD terms, including five-year CDs. The average rate for those went from 0.28% to 0.74%.

By October, average rates were up to 0.71% for a one-year CD and 0.83% for a five-year CD. While the current averages still may not sound very impressive, the best CD rates now top 3.5% for a one-year CD and 4% for a five-year CD.

When Will CD Rates Go Up?

Banks typically move much more quickly to charge higher interest than they do to pay higher interest. So, while mortgage rates have been soaring, CD rates have only been inching up.

How various interest rates—including those on CDs—move during the coming months will depend greatly on what the Federal Reserve does.

So far this year, the Fed has boosted its benchmark federal funds rate five times, taking it from near 0% to a range of between 3% and 3.25% in an effort to curb inflation. Further rate increases are expected this year, with the federal funds rate projected to surpass 4% by the end of 2022.

The federal funds rate is what banks charge each other for overnight loans, and changes in the rate tend to affect borrowing costs for an array of financial products.

When the federal funds rate rises, interest rates normally rise on mortgages, credit cards, CDs and other loan and deposit products.

CD Interest Rates Forecast for 2022 and 2023

No one can accurately predict how CD interest rates will perform the rest of this year. But experts can give us a pretty good idea—and they say things are generally looking up.

Ken Tumin, founder and editor of DepositAccounts, expects CD rates to keep climbing this year and next.

If the Fed carries out two more rate hikes this year, for a total of seven, and three or four in 2023, Tumin predicts the highest rates for five-year CDs will hit a range of 4.00% to 4.50% by the end of next year.

“For savers, it seems like it makes the most sense to stick with online savings accounts until signs start pointing to the Fed transitioning to a pause. At that point, we may see 4% and maybe even 5% long-term CDs” in 2023, he writes.

CD Rate Forecasts in Brief

Banks’ Profit Motives Dictate Rates for CDs

CD rate increases will be modest, because low rates are good for banks’ bottom lines, says Niagara University’s Lee.

“There are always gaps, or spreads, between mortgage rates and CD rates which become banks’ profits. When interest rates are up, the gaps become bigger temporarily and enable banks to be more profitable,” he explains. “That is why banks are more profitable in an environment when interest rates are up.”

To underscore that point, Lee notes that average mortgage rates went up more than 2 percentage points during the first five months of 2022, compared with less than 0.5 percentage point for CDs.

But with inflation still sizzling, mortgage rates and CD rates should keep increasing this year—but at their different paces, Lee says. He sees mortgage rates surging to about 7%, while typical CD rates will edge up from less than 1% today to around 2%.

“Mortgage rates will change quickly,” he said, “while CD rates will change slowly.”

Treasury Bonds Pay More Than CDs

Kevin Mirabile, a professor of finance and business economics at Fordham University’s Gabelli School of Business in New York, has a similar outlook. He foresees CD rates being higher by the end of 2022, but not by much.

Average rates for one-year and five-year CDs should be close to 2% and 3% by year’s end, Mirabile says—“assuming, of course, that the Federal Reserve sticks to its current plan to combat inflation and that the banks don’t get too greedy.”

Meanwhile, Treasury bonds are paying higher returns than CDs. Yields on both the one-year and five-year Treasury were hovering around 4% at the start of October.

“When Treasury yields are rising, banks are often slow to adjust CD rates, and so they may offer a lower rate than Treasuries,” says Mirabile. Banks use CDs and other deposits to fund loans and investments in Treasurys, so the lower the rate they pay, the more they profit.

Some CDs will have rates far above the meager averages, but you’ll need to know how to find them.

“Investors who want to get the highest rate possible on a bank CD should look beyond national averages and shop around for the best rate,” Mirabile says.

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