The ongoing U.S. banking sector turmoil has worsened following the collapse of Silicon Valley Bank(SVB) earlier this year. The ongoing crisis has badly hit the stocks and is expected to curtain economic growth in 2023 and beyond. On the other hand, the Federal Reserve has increased its interest rates for the tenth time in a row in March. Following the hike of 0.25 percentage points, the rates of interest now stand between 5% and 5.25%.
Amidst higher interest rates and the SVB crisis, banking institutions in Arizona are feeling the pressure. This seems to be translating into lucrative benefits for customers: higher CD and savings rates. According to financial analysts, the banking industry crisis has driven many jittery depositors to shift their investments from regional banks to larger banks.
This is pushing Arizona banks to raise their CD and savings account rates to incentivize consumers and attract more money to improve their reserves. According to the founder of ComplexSearch.com, Nathan Richardson, “banks have become apprehensive following one of the United States’ largest banking failures ever. By any means, they want to shore up the deposit levels and minimize the risks of shutting down soon. As such, deposit rate hikes are likely this year and beyond.”
Nathan argues that, “right now banks are trying to make the most of the current scenario and build customer relationships. This is another reason why banks, especially online banks, are increasing their deposit rates – to make it simpler for consumers to move money away from their competitors and to their reserves.”
Banks Put Off their Decision to Increase Deposit Rates, But Only Until Now
Until now, Arizona CD Rates have risen dramatically for both regional and local banks. However, as Fed interest rates rise, banks are constantly feeling the pressure of giving away with their practice of paying dirt-cheap interests to depositors.
Earlier, banks were able to keep their interest rates low because most consumers would not shop around to find the best deals. Things have changed now. Consumers have become more informed today and they will compare interest rates from different banks to make a wise decision.
Additionally, the competition on interest rates is soaring high. This has forced the banks to increase their rates on various types of accounts as well as offer attractive high-yield options to depositors. The objective is to retain the existing customers and attract new deposits to maintain the banks’ reserves.
Presently, banks are offering on average 0.39% interest on savings accounts. On the other hand, interest rates on 3-month and 12-month CDs stand at 0.78% and 1.54% respectively. Meanwhile, the average rate of interest on a 5-year CD was 1.35% as of March 20, 2023. This is a significant jump from March 2022, when the Annual Percentage Yield (APY) for a 12-month CD was 0.15% and a 5-year CD was 0.29%.
An Overview of Arizona’s Present Savings Account and CD Rates
Arizona isn’t just about bustling city life and awe-inspiring landscapes. The state also offers lucrative opportunities for depositors to maximize their savings. Arizona banks are already offering attractive interest rates on savings accounts, certificates of deposit, and fixed-rate annuities. The recent turmoil in the banking sector is further pushing them to hike the rates.
Here is an overview of CD and savings account rates in Arizona as of September 2023 –
- CD Rates in Phoenix may range between 5.26% and 5.50%.
- Interest rates on annuities extend up to 6.00%.
- The highest APY you can earn on a 3-month CD is 5.35%, while 12-month CD rates may extend up to 5.51%. For higher term periods, such as 5 years, the highest CD rates stand between 4.35% and 4.50%.
How Long Will Bank Rates Continue to Rise?
Perhaps, this is one question that many depositors and Arizona banks are pondering over right now.
According to the Federal Reserve, the fight against the current inflation situation is far from over. Presently, the US inflation rate stands at 6% and the Fed strives to bring it down to 2%. It indicates that the central bank may further hike the interest rates shortly, if not in 2023.
As long as the Fed Reserve continues to increase its interest rates, the deposit rates will also hike. While this comes as good news for depositors, it is indeed building up pressure for banks as well as for the economy.