GO FED, GO!
While borrowers are feeling the pain, savers are seeing opportunities for the first time in over a decade.
The Fed in 2022…so far.
It may feel like a distant memory, but as recently as first quarter 2022 the effective Federal Funds Rate was 0%. In March, however, the Federal Reserve began raising that key interest rate in an effort to stem rising inflation. Six months—and six raises—later and the overnight borrowing rate rests at 3.75%, it’s highest level since 2018[1].
The Silver Lining
Now is certainly not the best time to lock in a 30-year mortgage, but it may be time to lock in a guaranteed savings rate. While “investors” are comfortable taking on the risk of loss in search of returns, “savers” prefer to avoid risk and seek predictable returns. It hasn’t been easy to be a saver for a long time since rates on savings accounts, CDs, money markets and fixed annuities have been anemic for years. In the current environment, though, savings rates are once again attractive. It is now possible to find 5-yeard CDs paying over 4.5% APY[2] and fixed annuities paying close to 5.5% APY[3] over the same period. It’s important to remember that CDs are issued by banks and offer FDIC protection while fixed annuities are issued by insurance companies and are not FDIC insured. Both products have limited liquidity during the rate guarantee period.
Ready to Lock It In?
Our firm is able to broker CDs from banks all across the country and annuities from many, many insurance companies. If you are a “saver” looking to capitalize on the current rate environment—and you would like some advice and guidance along the way—we are here to help.
[1] https://www.forbes.com/advisor/investing/fed-funds-rate-history/
[2] https://www.bankrate.com/banking/cds/cd-rates/
[3] Global Atlantic SecureFore 5. Rate as of 12/4/2022 and only for deposits of $100,000 and above.
