5-year CD Dips Below 1% for the First Time in History

The national average interest rate on the 5-year Certificate of Deposit dropped to 0.99 percent last week, marking the first time in recorded history that the hallmark of the long-term CDs dips below 1 percent, Dan Geller, Ph.D., Executive Vice Presidents at Market Rates Insight, San Anselmo, California.

Dan Geller

The 5-year CD, which has always been the hallmark of high returns and stable annuities, has never dipped below 1 percent for as long as interest rate records are available, he reported. In the last decade, the 5-year CD reached its peak in August of 2000, when the national average rate for the 5-year CD stood at 6.25 percent. The highest the 5-year CD rate has ever been was in June of 1981, when rates for this CD were over 20 percent.

Other long-term CD rates are also declining, Geller noted. The 4-year CD also reached a record low of 0.78 percent this week, and the 3-year CD rate now stands at 0.63 percent. In the last decade, both the 4-year CD and the 3-year CD reached their interest rate peak in August of 2000, with an interest rate of 6.13 percent. The national average rate for all CD terms, from 3 months to 5 years, also reached a record low this week, and now stands at 0.46 percent.

“Interest rates are making history, but clearly not in a favorable way,” he said. “Unfortunately, the continuing decline in interest on deposits indicates that banks are forced to reduce their interest expense due to the soft lending market. As long as lending remains soft, and loan rates low, we will not see a change of course in deposit rates.”

Dan Geller Ph.D.
Executive Vice President
Market Rates Insight, Inc.
415-448-8813 (phone) | 415-259-0701 (fax)
[email protected]