Highest Savings Account Interest Rates (February 2024) | Freo (2024)

FAQs

How high will savings interest rates go in 2024? ›

As of June 2024, the national average interest rate on a savings account was 0.45%, according to FDIC data. However, the best online savings accounts offer rates near or above 5.00% APY.

Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate later this year, according to the CME FedWatch Tool on June 11. If the Fed rate drops, CD rates will likely follow suit, though it's up to each bank and credit union if and when that occurs.

Can you get 6% on a CD? It is possible to get a 6% certificate of deposit, but these sought-after savings rates won't be available at every bank. In fact, no banks currently offer a 6% CD.

New Outlook On Monetary Policy

The median projection for the benchmark federal funds rate is 5.1% by the end of 2024, implying just over one quarter-point cut. Through 2025, the FOMC now expects five total cuts, down from six in March, which would leave the federal funds rate at 4.1% by the end of next year.

A stocks and shares ISA is likely to be most suitable. That is unless you will turn 55 within 30 years, in which case a pension might be a better tax wrapper for you. If you're unsure about the time horizon, you could invest in both a pension and a stocks and shares ISA.

What banks are offering 7% interest on CDs? Currently, no U.S. banks or credit unions are offering 7% APY on CDs. During August 2023, a few credit unions were offering 7% interest on CDs, but those were limited-time offers that are no longer available.

Junk Bonds

Junk bonds are high-yield corporate bonds issued by companies with lower credit ratings. Because of their higher risk of default, they offer higher interest rates, potentially providing returns over 10%. During economic growth periods, the risk of default decreases, making junk bonds particularly attractive.

Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.

The FOMC approved a plan in December to cut interest rates three times in 2024, with an expected rate cut of 0.25% each time. Further rate cuts in 2025 and 2026 would bring the federal funds rate even lower.

Also, mortgage rates are still much higher than we've been used to in recent years. On 30 May 2024, the average 2 year fixed mortgage rate is 5.80%. While this is a significant drop from its July 2023 peak of 6.86%, it's still much higher than December 2021 when was 2.34%.

How high will interest rates go in 2025? ›

Prediction of Mortgage Rates for 2025

Keep in mind that inflation is still a factor, and mortgage rates may continue to hover around 6%. Here are some predictions for 2025 from key players and industry associations in the mortgage space: Fannie Mae: 6.1% Mortgage Bankers Association: 5.9%

For I bonds issued between May 1, 2024 and Oct. 31, 2024, the fixed interest rate is 1.3%. A second interest component is based on inflation rates, and it resets every six months. It most recently reset in May and is currently 2.96%, down from 3.94% last November.

Think about your cost structure and debt load carefully for 2024. The prime rate today is 8.5%. The Fed signaling cuts equivalent to 75 basis points would put prime between 7.5% and 7.75%. This, of course, assumes the 30-year average spread between the fed funds rate and Prime holds.