One of the biggest questions savers are asking is when will the interest rates on savings accounts increase.
Unfortunately, the answer to that is impossible to predict. There are, however, a few indicators that could serve as cues for an increase in savings interest rates.
Bank Profits
There is no direct correlation between the profit enjoyed by banks and the savings account interest being offered. But an improvement in bank profits would probably eventually result in higher savings rates.
That because deposits in CDs, and savings and money market accounts form the foundation of a bank’s activities including financial market trading and making auto and home loans. When those transactions are thriving, banks have an incentive to offer good savings interest rates to attract funds.
You can review the quarterly earnings reports of banks to get a feel for how profitable they are.
Housing
The activity in the housing market is another bellwether that can indirectly influence the savings interest rates. When the housing market is bustling and people are buying and selling new and existing homes at a brisk pace, it’s a sign that there is money being lent and most importantly, being paid back. That will eventually trickle up to improve savings rates.
The Markets
Any troubles or instability in the market will not help the bank rates. In fact, the same issues that negatively impact stocks could also result in many more months of low savings interest rates.
The Economy
Probably the largest impact on the performance of the savings interest rate is the economy. That means that until people want to and can borrow and the banks accept the risk, there are few ways the banks can make money with deposits.
It hasn’t helped that the government policy is to keep interest rates low because they hope that will stimulate the economy. The fact that hasn’t happened yet doesn’t matter, either. The government will probably continue to keep rates low until the economy perks up.
Searching for the Best Savings Account
However, all of this doesn’t mean you don’t want to save. There are ways to select the right savings account that will help you achieve your savings goals even in a down economy.
Savings is always a good idea. And as long as you are not losing money, any little bit helps. Even if you find a savings account with a 1.30% yield, and you place $1,000 in there for a year, you will have an additional $13.00 by the end of the year as well as the original $1,000.
Right now, that doesn’t seem so bad.
