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What’s next for interest rates?

By Mark Hamrick ·
Tuesday, January 21, 2014
Posted: 12 pm ET

If the economy continues to stage a slow but steady recovery, interest rates are expected to rise. But we're all wondering when and by how much? Those will be the big questions as both borrowers and savers try to navigate the financial landscape in the year ahead.

Some rates already rising

A key interest rate controlled by the Federal Reserve -- the federal funds rate -- is not expected to increase again until 2015. But a variety of other rates that have more of a direct impact on consumers are set by the marketplace and have already been moving. Last year, for example, mortgage interest rates staged a rapid and surprising surge after Federal Reserve Chairman Ben Bernanke signaled a possible earlier-than-expected pullback in the Fed's asset purchases.

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What's next for interest rates?

Some rates are on the move, but borrowers shouldn’t fear big shocks and savers shouldn't get their hopes up.


Rates on 30-year fixed-rate mortgages could rise as high as 5.5 percent this year, says Bankrate chief analyst Greg McBride. That's nearly a full point above the current average in Bankrate's weekly survey: 4.57 percent. As for auto loan, home equity lines of credit and credit card rates, little change is expected in the coming year.

Not so great for savers

So, while the news isn't bad for borrowers, savers don't have much to look forward to. McBride says rates for savings and money market accounts and short-term certificates of deposit will likely "stay in the basement throughout 2014." Bankrate's latest weekly survey finds that yields for both one- and five-year certificates of deposit remain below 1 percent.

What do you think of the interest rate forecast? Are you encouraged by the outlook for borrowers? Are you saving despite low rates of return?

Follow me on Twitter: @Hamrickisms.

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Lynn Fusco
January 23, 2014 at 12:32 am

Clinton - surplus
Bush - biggest deficit ever ans saddled with an imaginary danger war - Iraq
No matter who inherited his mess it is going to get uglier.all the American blood shed in Fallujah and the Taliban has it. That war made us universally hated and as predicted destabilized the whole region.everyone acts like this debt is a mystery, the mystery is where did Cheney get that heart

Barry Prior
January 22, 2014 at 9:50 am

In May, when Bernanke made his first statement about tapering, the mortgage rates and 10 year yield rose. In September when he made a statement indicating that the tapering would be delayed, interest rates went down. In December, they officially announced the monthly taper program. Has anyone noticed the rates have trended down in January. Does anyone really know the answer since the results appear to be contradictory to forecasts?

January 22, 2014 at 9:39 am

The reason for this slow recovery can be attributed to one person and only one person. The person in question was elected despite he had absolutely no qualifications to have this job none - nada - 0 - ect. He was elected by the stupid and libs of this country that wanted to keep their free ride from the working of this great country. The only winners in this terrible economy is the liberals that have refinanced all the money out of their homes and then are either refinancing or walking away from their under water houses that they already got their money by refinancing. I really cantsay all dems but everyone I have talked to were dems. And no I am not a republican I am independant

January 22, 2014 at 8:48 am

The interest rates for CD's are shameful. If banks are charging more to lend money they need to adjust the rates for the people who have provided that money. I worked hard and was frugal all my life and believed that my little nest egg and IRA would provide some supplemental income to my social security. What a disappointment and slap in the face to seniors that made sacrifices to save.

January 22, 2014 at 7:48 am

Why don't you just purchase a fixed annuity with no stock market risk and no fees or sales charges, and get 3% or more every year? Because the US population has been brainwashed into believing they must have FDIC.

January 22, 2014 at 6:51 am

Ben Bernanke and his policies have been enemy no. 1 to all responsible savers in this country, and it appears that his successor will follow the same path as he laid out. If you have been an irresponsible citizen, and lived beyond your means, then you get all of the advantages, bail outs, low interest rates, you name it. If you have been responsible, and lived within your means, trying to save a little for the future, you have been rewarded with historically low interest rates upon which to try to build your savings. It's time to turn this ill conceived logic around and reward the people who are truly deserving.

January 22, 2014 at 12:05 am

Why doesn't Bankrate include some of the internet banks in their survey regarding interest on savings and CD's. No problem finding rates well over 1% and some longer term as high as 2.0%.