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Maturing CDs could mean low-cost loans

By Sheyna Steiner · Bankrate.com
Thursday, March 21, 2013
Posted: 11 am ET

Back before the days of ultra-low interest rates, way back in 2008 and before, rates on certificates of deposit were pretty darn good, at least from the standpoint of today's sub-1 percent yields on the average five-year CD.

In September 2008, the yield on the five-year CD peaked and then began to fall, according to a new study released by Market Rates Insight, a financial industry consulting firm. Bankrate's research also shows that the CD rate peak came late in September 2008. Check out what happened to CD rates since that high point.

In September of this year, the CDs issued five years ago in 2008 will be maturing and that could be good news for borrowers, according to the study.

The maturity of those relatively high-yielding CDs will be bad news for the savers who own them. Forced to fend for themselves in the cold, yield-barren world of 2013, CD buyers will find that the average yield on a five-year CD is now 0.83 percent. But the pain of savers may be to the benefit of borrowers as banks may be able to drop the cost of loans slightly as they will no longer be paying out higher CD rates, Market Rates Insight reports.

"The maturation of the five-year CDs from 2008 is a mixed bag. It will adversely impact those who depend on higher interest rates as income, but it might make loan rates more attractive due to declining cost of funds at banks and credit unions," says Market Rates Insight Vice President Dan Geller in the press release this week.

When did your last good CD mature?

Follow me on Twitter: @SheynaSteiner.

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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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