CD Savers – Will They Ever Earn A Good Return?

One of the most pressing questions of saving investors who have bought CDs is regarding when will they be able to earn a decent return for their investment? While many investors wait in apprehension for the change in rates announced by the Feds, CD investors are constantly on the lookout for the welcome news which will just not come. Since 2008, when the Feds lowered the rates to an all time low to make the economy more stable, there has been no increase made in the rates at all.

The rates were lowered as a move to counter and deal with the unstable economy which resulted from the crash of the housing sector of the economy. While the economy has reached a more stable foundation now, there has still been no sign of the long promised rise in rates, which CD savers are waiting for.

The Certificates of Deposit, which usually ensure higher rates in exchange for locking up their savings for a long period of time, have been subjected to offer yields which have been at an all time low. Some have even lingered below the saving account rates!

A hike in the Fed rates can solve all these issues, but the change will not be as quick as one might like. According to Greg McBride, who is a chief financial analyst at Bankrate, it is a common trend that CD yields rise in anticipation of the rate hike, which continues after the increase in the rate. He said that the current condition of the market shows no high yields made in anticipation of the rate hike long promised by the Feds.

Another major element that is contributing to the issue of a low yield is that it is averaging just at 0.23% for the 1 year CDs. In the meantime, banks are full of a deposit wealth and just lack the loan demand to compliment it.

The banks in the sector are facing different problems, and while some may be offering a 1 year return on CD rate which is lower than the annual percentage rate that is earned on the savings account, there are still others with different offers. There are some banks which do offer decent CD rates, yet all await a change in the Fed rate.

The differences in the CD rate yield return offered by different banks marks why it is important that investors should browse the market, before they lock up their liquidity by investing in a Certificate of Deposit. This assessment was given by Jeffrey Tomaneng, who works as a certified financial planner with the Lincoln Investment Planning.