After the long decline in rates since the Great Recession, this could be the turning point where rates start a sustained climb – if the economy avoids another setback.
Foster City, Calif. (PRWEB) December 09, 2013
After years of historically low deposit rates, consumers faced the additional obstacle of rising mortgage rates in 2013. But according to MoneyRates.com’s latest interest rate forecast, 2014 could finally see deposit rates follow mortgage rates higher – provided a few critical economic pieces fall into place.
Richard Barrington, CFA, MoneyRates.com senior financial analyst and author of the forecast, says that many of the indicators that could impact interest rates – such as employment, consumer debt levels and home prices – all strengthened somewhat in 2013, which could lead to interest rates rising on short-term deposits as well as mortgages in the months ahead.
“After the long decline in rates since the Great Recession, this could be the turning point where rates start a sustained climb – if the economy avoids another setback,” Barrington says.
Still, there are factors that could turn rising deposit rates into a net loss for consumers in 2014. Rising mortgage rates, for instance, could outpace rising deposit rates in a way that favors banks over consumers. The gap between mortgage and deposit rates widened throughout much of 2013, and a continuation of this trend could make rising deposit rates a bittersweet consolation for consumers in the new year.
“For a number of reasons, expect mortgage rates to climb faster than deposit rates in 2014,” Barrington says. “That’s a win for banks, and a loss for consumers.”
An uptick in inflation could also push interest rates higher, but Barrington says that a variety of current conditions suggest that inflation is likely to remain under control in 2014. The annual rate of inflation has averaged just 1.52 percent over the last five years, compared to 4.13 percent over the last 50 years. Assuming inflation continues to be mild, the rise in interest rates should be limited, leaving deposit rates and mortgage rates still well below their historical norms, he adds.
The overall outlook for interest rates in 2014 could be impacted by several other things throughout the year – including the decisions of the Federal Reserve – but many of the likely scenarios include the possibility that the interest rates for different products could move at varying speeds and directions. That means that to make the most of these shifts, consumers will need to pay careful attention to these discrepancies, says Barrington.
“When rates are on the move, consumers need to be especially active about shopping for rates,” Barrington says. “In a more dynamic rate environment, the rate gaps between different products at different banks are likely to widen.”
For the full analysis, please see MoneyRates.com’s 2014 interest rate forecast.
MoneyRates.com has been a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. The site provides the highest rates on certificates of deposit, money market accounts and high-yield savings accounts. MoneyRates.com is owned and operated by QuinStreet, Inc. (NASDAQ: QNST), one of the largest Internet marketing and media companies in the world. QuinStreet is committed to providing consumers and businesses with the information they need to research, find and select the products, services and brands that best meet their needs. The company is a leader in ethical marketing practices. For more information, please visit QuinStreet.com.