What will drive rates in 2021
With the Fed not expecting to raise rates for several years, savers will likely need to wait until banks actually need deposits again before yields on savings and money market accounts increase.
“Banks want deposits if they can lend against them,” says Adam Stockton, director of consumer pricing at Novantas. “That’s ultimately how they make money.”
More lending may create a demand for deposits again, at some point.
“Loan growth has not been zero this year, but it has been kind of far slower than the amount of deposits that have come into the system through the government stimulus,” Stockton says. “And so… there aren’t enough opportunities [for banks] to lend the deposits that have come in.”
Stockton projects the top-yielding savings accounts and money market accounts will look much the same in December 2021 as they do now. As he sees it, it will probably take until late 2021, or more likely 2022 for upward movement in rates.