In the fall of last year I wrote a blog about the interest paid on certificates and discussed why and when the rates might increase. It’s been a long time since then, and the Federal Reserve seems finally ready to make a change.
Two things are really the determining factors for an increase in the interest paid on certificates:
- Loan demand, and
- The Fed’s policy on interest rates.
Over the past 18 months, demand for loans at Family Trust has skyrocketed. Loan growth has materially outpaced the growth in deposits. Although the consensus opinion was the Fed would increase short-term rates in September, they chose to delay. Now it seems certain the first increase will come in December. So we finally have together the high loan demand and the Fed’s action to increase rates.
So what should you expect? Our board voted in November to increase certificate rates effective Dec. 1. This is the first increase going back to at least 2008. The new rates will be posted on this website and also available in our branches. As always these rates are subject to change.
So what should you do? Our certificate rates are the best in our local market and we plan to keep them the best. Will they continue to go up? They may. We cannot predict interest rates. Our best option for return on savings continues to be Payback Savings, which has no maturity and the funds are always available for withdrawal. If interest rates continue to increase, there will come a time when the Payback rate will also go up. I do not foresee that in the next few months.
If Payback Savings is not the best option for you, then I recommend a certificate of deposit with a term of 1-year or less. Of you may prefer the 36-month “Bump-your-Rate” certificate. This option allows you to request a higher rate twice during the 3-year term.
Just for clarity, we are not predicting rapid and dramatic increases in rates for deposits or for loans. But we are saying there will be some activity for rate increases in certificates, which has been long-awaited by many of our members. For information and guidance on the option that is best for you, please visit any of our branch locations.