It may finally happen this year. Savers could get more than peanuts on their cash.
Bankrate.com Chief Financial Analyst Greg McBride expects the Federal Reserve to hike rates three more times by the end of the year...and that could mean higher yields on cash accounts. McBride expects the savings accounts to yield as much as 2.3% and 5-year CDs t0 pay 3%. For some context, the best rates available on savings accounts currently is about 1.55%, while the national average is a puny 0.25%, according to Bankrate.com. And the best rate on a 5-year CD is about 2.5%, with the national average closer to 2.2%.
Demand for yields has made high-yield bonds and dividend paying stocks popular with investors. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG), which has a 12-month yield of %4.79, has returned 5.7% annually over the past 10 years, while the SPDR S&P Dividend ETF (SDY), which pays a 12-month yield of 3.21%, has returned 10% annually. The S&P 500, which has a 12-month yield of 1.80%, has returned 8.5% during the same period.
The flip side of higher rates, of course, is that borrowers could be paying more. McBride forecasts more volatile mortgage rates, dipping below 4% at least once, spiking above 4.5% and closing the year, on average, around 4.5%. Credit card borrowers, as well as those with a home equity line of credit, should see a 75 basis point increase soon. By the end of the year, average credit card rates should be around 17.15% and HELOCs will be around 5.85%.
Auto loan rates, however, will see more muted increases as the ongoing economic recovery and low delinquencies among the most sought-after, or prime, borrowers fuels competition among lenders. Bankrate expects the average car loan rate to hit 4.85% by the end of the year.