A key long-term certificate of deposit rate has reached a historic low after falling below 1%.
The average five-year CD rate dropped to 0.99% nationwide, according to a Monday report from Market Rates Insight. While shorter-term CD rates had long since dipped below 1%, longer-term rates are also falling in an unprecedented fashion.
"The five-year CD, which has always been the hallmark of high returns and stable annuities, has never dipped below 1% for as long as interest rate records are available," the report said.
The five-year CD averaged 6.25% in August 2000, though it topped 20% in June 1981.
The decline in longer-term rates provides more evidence that banks are continuing to reduce funding costs to address margin pressure largely from low loan demand and pricing. "As long as lending remains soft, and loan rates low, we will not see a change of course in deposit rates," Dan Geller, executive vice president at Market Rates Insight, said in the release.
The average rate for all CDs, with terms ranging from three months to five years, was 0.46% last week.
