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Half of renters in the U.S. are considered cost-burdened, according to a recent study.
Cost-burdened households are those who spend 30% or more of their income on rent and utilities.
“If you go through any sort of life crisis, you’re on the brink of homelessness,” said Whitney Airgood-Obrycki, lead author and senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University.

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Rent prices are coming down in some areas, but not at the pace needed to relieve tenants struggling to pay rent.
Half of renters in the U.S. spent more than 30% of their income in 2022 on rent and utilities, according to the new America’s Rental Housing report by the Joint Center for Housing Studies of Harvard University.

The report considers those who spend 30% or more of their income on housing “rent burdened” or “cost burdened,” which means those high costs may make it difficult for them to meet other essential expenses.
The share of cost-burdened renters increased by 3.2 percentage points from 2019 to 2022.
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“Places in the market that need the most relief are at the very low end, and it’s hard to reach those people through market rate supply alone,” said Whitney Airgood-Obrycki, lead author and senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University.
While cost burden has increased across income levels, the consequences are much higher for low-income households, said Airgood-Obrycki.

‘We have a very unaffordable country right now’

The average residual income, or the amount of money available after paying for rent and utilities to cover other needs, has significantly dropped for lower earners, the study found.
“It’s a really important part of the conversation because … it makes it more humanizing how big this problem is,” Airgood-Obrycki said.
Renter households with annual incomes below $30,000 had a record-low median residual income of $310 a month in 2022, the Harvard study found. For perspective, a single-person household in even the most affordable counties need about $2,000 a month for non-housing needs, according to the Economic Policy Institute.
“The underlying problem is we have a very unaffordable country right now,” she said. “If you go through any sort of life crisis, you’re on the brink of homelessness.”
Most young adults have either stayed at home with their parents or are moving back in because of the cost of living.

Share of young adults living at home goes back to 1940s

Historically, what kept young adults living at home was the lack of a job; today, it’s the lack of affordable housing, according to Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania.
The percentage of Gen Z adults living at home “takes us all the way back to 1940, the end of The Great Depression,” said Wachter.

The share of young adults between the ages of 18 and 29 who live at home with parents is almost at 50%, according to a study Wachter co-authored.
That is a result of young adults competing with potential homebuyers, who themselves are being priced out of the single-family housing market.
“They’re competing in a way that they haven’t before,” she said. “The home mortgage market is indirectly causing a huge spillover demand into the rental market, making the rental market not affordable.” More

Smart Tax Planning

House lawmakers on Wednesday passed a child tax credit expansion that could benefit millions of low-income children, experts say.
“There are real benefits here for 16 million kids in low-income families,” said Chuck Marr, vice president for federal tax policy for the Center on Budget and Policy Priorities.
While the House overwhelmingly approved the bill, it still needs 60 votes to pass in the Senate.

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House lawmakers on Wednesday night passed a $78 billion bipartisan tax package, including a child tax credit expansion that could benefit millions of children in low-income families, according to policy experts.
If enacted, the bill would expand access to the child tax credit, or CTC, and retroactively boost the refundable portion for 2023, which could affect taxpayers this filing season.

While less generous than the pandemic-era child tax credit, the proposed changes still represent “real money” for millions of families, according to Chuck Marr, vice president for federal tax policy for the Center on Budget and Policy Priorities.
The House overwhelmingly approved the bill, but it still needs 60 votes to pass in the Senate amid competing priorities.

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“There are real benefits here for 16 million kids in low-income families,” Marr said. “This doesn’t do everything it needs to be done, but it’s definitely an important step in the right direction.”
The bill would expand the child tax credit through 2025 and lift as many as 400,000 children above the poverty line in the first year, and an additional 3 million children would be less poor, according to a recent report from the Center on Budget and Policy Priorities.
If it is enacted, eligible families could see an average tax cut of $680 for 2023 taxes, according to estimates from the Urban-Brookings Tax Policy Center.

2021 expansion dropped child poverty rates

“We know that the child tax credit is an incredibly effective, well-targeted mechanism for delivering relief to families with children,” said Steven Hamilton, assistant professor of economics at The George Washington University. 
The child poverty rate “precipitously dropped” during the 2021 child tax credit expansion, Hamilton said. “And then as soon as that expired, it radically increased.”

The American Rescue Plan boosted the maximum tax break to $3,000 or $3,600 per child, up from $2,000, and sent monthly payments to families. As a result, the child poverty rate fell to a historic low of 5.2% in 2021, largely due to the expansion, a Columbia University analysis found.
After pandemic relief expired, childhood poverty more than doubled in 2022, jumping to 12.4%, according to the U.S. Census Bureau. 

The long-term impact of CTC expansion

A permanent expansion of the child tax credit could also provide long-term benefits, according to research published Thursday by the Urban Institute.  
Modeling a permanent version of the 2021 child tax credit increase, the report projects higher graduation rates and future earnings for children whose families are child tax credit recipients.

Even a small boost of income can pay really big dividends.

Nikhita Airi
Research analyst at the Urban-Brookings Tax Policy Center

“Even a small boost of income can pay really big dividends” throughout life, said Nikhita Airi, research analyst at the Urban-Brookings Tax Policy Center. 
While the model used the bigger child tax credit enacted during the Covid-19 pandemic, the organization would expect “similar results on a smaller scale” with the current version of the expansion, Airi said. 
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Rent costs are beginning to come down from record-high asking prices.
Prices are beginning to come down as supply boosts vacancy and demand slows from record highs in 2022.

Recep-bg | E+ | Getty Images

Rent costs are beginning to come down after record-high asking prices.
“Rental markets are cooling, but in a lot of places, it doesn’t mean they’re falling. It means they’re growing at a slower pace,” said Whitney Airgood-Obrycki, a senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University. 

Prices are beginning to come down as supply boosts vacancy and demand slows from record highs in 2022.
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As of December, the median U.S. asking rent price fell to $1,964, down 0.8% from a year prior. That’s the third consecutive monthly decline, according to real estate site Redfin, following a 2.1% drop in November and 0.3% in October. The rent price reflects the current costs of new leases during each time period and the data includes single-family homes, multifamily units, condos/co-ops and townhouses.

More higher-end units may spur ‘filtering-down effect’

Easing rents are happening indirectly. The new builds that are boosting supply are mostly among higher-end apartment units, which can command higher asking rent prices, said Susan M. Wachter, a professor of real estate and finance The Wharton School of the University of Pennsylvania.
“It’s kind of a ‘filtering-down effect,’ which will eventually affect rents,” Wachter said.

It will take time for boosted supply and slowed demand to significantly improve rent affordability across income levels.

According to Airgood-Obrycki, most of the construction is happening in professionally managed apartment buildings, which are classed by A, B and C categories.
“New apartments are almost always Class A,” she said. “What we’re adding is really at the high end.”
Increasing the supply of higher-rent Class A units often encourages tenants to upgrade to new units, making prices in those units level out and boosting vacancy in Class B and C units, Airgood-Obrycki said.

There are more newly built and under-construction buildings coming to the market than there were a year ago, Redfin found. The amount of completed apartments alone is near the highest level in more than 30 years while those under construction are close to a new record.
Some areas are already seeing these effects. The South and West regions are seeing prices cool due to more new builds and prices in the Midwest and Northeast remain elevated due to less availability, Redfin found.Don’t miss these stories from CNBC PRO: More

The U.S. Department of Education said FAFSA delays may affect the timing of financial aid offers.
Here’s what students and families need to know.

What the FAFSA delays mean to you

In ordinary years, financial aid award letters are sent around the same time as admission letters so students have several weeks to compare offers ahead of National College Decision Day on May 1, which is the deadline many schools set for admitted students to decide on a college.
For most students and their families, which college they will choose hinges on the amount of financial aid offered and the breakdown between grants, scholarships, work-study opportunities and student loans.
This year, schools are now waiting on that FAFSA information to begin building financial aid packages and to give students and families enough time to weigh their options.

It is a real mess.

Mark Kantrowitz
higher education expert

“It is a real mess,” said higher education expert Mark Kantrowitz. “The delay in sending FAFSA data to colleges will cause college financial aid offers to be delayed until at least April, maybe even May.”
Some colleges have already emailed applicants to reassure them that every admitted student will still receive their financial aid package on time — even if that means sending out award letters before the college receives any FAFSA information.
“Making an offer of admission without offering a full financial aid offer really isn’t useful for most families,” said Adam Miller, vice president for admission and financial aid at Whitman College in Walla Walla, Washington.
To do this, Whitman and other colleges would need to leverage the information families provided in their completed CSS Profile. Currently, about 400 schools use the CSS profile in addition to the FAFSA to award nonfederal institutional aid. 
While FAFSA information will ultimately determine whether a student’s financial aid offer includes federal or state grants as opposed to scholarships, Miller said the expected out-of-pocket contribution for families will not be changed. 
“We feel really confident in our financial aid offers, and we’re fortunate to be in a position to stand by those offers regardless of what federal or state funding may come through once we have the FAFSA.”

What students and families can do now

For now, families should continue to complete their 2024-25 FAFSA forms, advised Rick Castellano, a spokesperson for Sallie Mae. And, in the meantime, tap alternative sources for merit-based aid, he added.
Check with the college, or ask your high school counselor about opportunities. You can also search websites such as Scholarships.com and the College Board.
“The frustration is totally understandable and, frankly, justified,” Castellano said, “but the last thing you want to do is bypass college altogether.”

What delays mean for College Decision Day

There’s also a good chance that colleges and universities will extend their decision deadlines to give students and families more time to assess their financial aid packages.
“Given schools will not begin to receive processed FAFSA data until sometime in March, I would not be surprised if the universal reply date is extended to June 1 or later,” said Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College.”
Several national organizations, including the American association of community colleges and the American association of state colleges and universities, also issued a statement encouraging schools to give students and families more flexibility as they consider their offers of admission and financial aid. 
“During the pandemic, many institutions extended their enrollment, scholarship, and financial aid deadlines beyond the traditional May 1 date, and we urge institutions to make similar accommodations this year,” the groups said in a collective statement. “We all want students and families to have the time they need to consider their financial options before making enrollment decisions.”
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The Biden administration announced on Wednesday that it will try to deliver student loan forgiveness to borrowers experiencing financial hardship.
In what has become known as Biden’s Plan B for student loan forgiveness, the president has turned to the rulemaking process.
The Department of Education is working to identify pathways to forgive student debt for as many borrowers as possible while staying within the limits articulated by the Supreme Court last year, according to a source familiar with its plans.

U.S. President Joe Biden speaks to United Auto Workers members at the UAW’s Community Action Program legislative conference in Washington, D.C., on Jan. 24, 2024.
Leah Millis | Reuters

The Biden administration announced on Wednesday that it will try to deliver student loan forgiveness to borrowers experiencing financial hardship.
After the Supreme Court struck down President Joe Biden’s executive order to cancel up to $20,000 in student debt for tens of millions of Americans, his administration has searched for ways to cancel the debt using existing legal authority.

In what has become known as Biden’s Plan B for student loan forgiveness, the president has turned to the rulemaking process.
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Over three rulemaking sessions, the negotiators tasked with determining who is eligible for the president’s revised relief plan came up with several groups of borrowers, including those with balances greater than what they originally borrowed and students from schools of questionable quality.
The Biden administration has been under pressure, however, to expand its aid to borrowers in financial hardship, too.
“We are concerned that, without full consideration of cancellation targeted toward borrowers facing financial hardship, the rule will not provide adequate debt relief for the most vulnerable borrowers,” lawmakers including Sen. Elizabeth Warren, D-Mass., wrote to U.S. Secretary of Education Miguel Cardona on Jan. 24.

The Biden administration seems to have heard those worries. The U.S. Department of Education will hold an additional rulemaking session on Feb. 22 and Feb. 23, during which the negotiating committee will focus exclusively on how to deliver relief to struggling borrowers.
Biden’s Plan B could forgive student debt for as many as 10 million people, according to one estimate. The president may try to deliver that relief before the presidential election in November.
In addition to the president’s second attempt to deliver sweeping student loan cancellation, the Education Department, under his tenure, has made a number of improvements to the government’s current debt forgiveness programs. As a result of those changes, more than 3.7 million Americans have received loan cancellation, totaling $136 billion in aid.
The administration is working to identify pathways to forgive student debt for as many borrowers as possible while staying within the limits articulated by the Supreme Court last year, according to a source familiar with its plans.

Student loan forgiveness and voters

As Biden prepares to run again for president, he’s trying to recover lost support among young voters and make up for the disappointment felt by borrowers who didn’t get the student loan forgiveness he promised.
During the 2020 presidential campaign, Biden pledged to forgive a large amount of student debt if he made it to the White House.
That vow likely played a role in the unprecedented turnout of college students in the election, experts say. Young voters also proved crucial to Biden’s success in several key states, including Arizona, Michigan and Pennsylvania.

Over 40 million people were promised cancellation, a number that dwarfs the 3.7 million who have received some measure of relief.

Astra Taylor
co-founder of the Debt Collective

Ultimately, the Supreme Court blocked the president from fulfilling his campaign promise last summer, ruling that his $400 billion loan cancellation plan exceeded the power of the executive branch. That decision came after the Biden administration opened applications for its loan relief of up to $20,000 per borrower and announced to some that it had “fully approved” their relief.
At the very least, that has likely left many young voters feeling frustrated with the political process, said Adam Gismondi, director of the National Study of Learning, Voting and Engagement at Tufts University, the largest survey of college student voting in the U.S.
“It seemed to be straightforward and achievable, but the political realities often end up complicating proposed policy solutions,” Gismondi said in a recent interview with CNBC.

Voters who support cancellation of the debt likely won’t find a more appealing stance in Biden’s opponent. Republicans largely oppose debt jubilees.
Former President Donald Trump said at a campaign event last summer that Biden’s effort to relieve people of their debts “would have been very unfair to the millions and millions of people who paid their debt through hard work and diligence.” While in office, Trump also looked to kill the popular Public Service Loan Forgiveness program, which clears the debt of government and certain nonprofit workers after a decade.
Still, Astra Taylor, co-founder of the Debt Collective, a union for debtors, believes Biden has to do more.
“Over 40 million people were promised cancellation, a number that dwarfs the 3.7 million who have received some measure of relief,” Taylor said.
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The Federal Reserve held rates steady at the end of its two-day meeting Wednesday, setting the stage for rate cuts to come.
For consumers, this means relief from high borrowing costs — particularly for mortgages, credit cards and auto loans — may finally be on the way.

The Federal Reserve announced Wednesday it will leave interest rates unchanged, setting the stage for rate cuts to come and paving the way for relief from the combination of higher rates and inflation that have hit consumers particularly hard. 
Although Fed officials indicated as many as three cuts coming this year, the pace that they trim interest rates is going to be much slower than the pace at which they hiked, according to Greg McBride, chief financial analyst at Bankrate.

“Interest rates took the elevator going up; they are going to take the stairs coming down,” he said.
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Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest in more than 22 years.
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.

Below the surface, 60% of households are living paycheck to paycheck.

Greg McBride
chief financial analyst at Bankrate

“Below the surface, 60% of households are living paycheck to paycheck,” McBride said. Even as inflation eases, high prices continue to strain budgets and credit card debt continues to rise, he added.
Now, with rate cuts on the horizon, consumers will see some of their borrowing costs come down as well, although deposit rates will also follow suit.
From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at where those rates could go in the year ahead.

Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark, and because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Going forward, annual percentage rates will start to come down when the Fed cuts rates but even then, they will only ease off extremely high levels. With only a few potential quarter-point cuts on deck, APRs would still be around 20% by the end of 2024, McBride noted.
“The credit card rates are going to mimic what the Fed does,” he said, “and those interest rate decreases are going to be modest.”

Mortgage rates

Due to higher mortgage rates, 2023 was the least affordable homebuying year in at least 11 years, according to a report from real estate company Redfin.
Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
But rates are already significantly lower since hitting 8% in October. Now, the average rate for a 30-year, fixed-rate mortgage is 6.9%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.

Doug Duncan, chief economist at Fannie Mae, expects mortgage rates will dip below 6% in 2024 but will not return to their pandemic-era lows, which is little consolation for would-be homebuyers.
“We don’t see the affordability problem solved until supply increases substantially, interest rates come down and real incomes rise,” he said. “The combination of those things need to move together over time. It’s not going to be sudden.”

Auto loans

Even though auto loans are fixed, consumers are increasingly facing monthly payments that they can barely afford due to higher vehicle prices and elevated interest rates on new loans.
The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — possibly bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.
“There are some very encouraging signs as we kick off 2024,” said Jessica Caldwell, Edmunds’ head of insights.
“Incentives are slowly coming back as inventory improves,” she said, and “most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out due to adverse financing and pricing conditions.”

Savings rates

While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
Although those rates have likely maxed out, “it will be another good year for savers even if we do see rates come down,” McBride said. According to his forecast, the highest-yielding offers on the market will still be at 4.45% by year-end.
Now is the time to lock in certificates of deposit, especially maturities longer than one year, he advised. “CD yields have peaked and have begun to pull back so there is no advantage to waiting.”
Currently, one-year CDs are averaging 1.75% but top-yielding CD rates pay over 5%, as good or better than a high-yield savings account.
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Building generational wealth is more difficult as young adults face high debts and housing costs.
A new bill aims to give young Americans a boost by starting savings accounts for every child starting from birth.
Here’s how much money families could receive under the plan.

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Building wealth may feel like a struggle for today’s younger generations who grapple with student loan balances and high home prices.
Now, a new bill introduced in Congress aims to make it so wealth creation starts from birth.

The proposal, called the 401Kids Savings Act, is led by Democratic Sens. Bob Casey of Pennsylvania, Chuck Schumer of New York and Ron Wyden of Oregon, as well as Democratic Reps. Don Beyer of Virginia, Joyce Beatty of Ohio and Suzan DelBene of Washington.
The plan calls for providing savings accounts for every child in the U.S. on state 529 college savings platforms, which would be managed by state Treasurers. Accounts would be established for kids under age 18 and for newborns.
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More than 80% of young adults ages 18 to 24 had less than $20,000 in wealth, according to a report on the proposal that cites 2019 Federal Reserve data.
The bill aims to double that, by making it so a qualifying low-income single parent with a newborn may accumulate more than $53,000 for that child’s benefit by the time they turn 18 years old.

“A lack of income means you can’t get by, but a lack of wealth means you can’t get ahead,” Casey said in a statement. “As American families grapple with rising costs, they deserve a way to save not just for their future, but for their children’s future.”

How the 401Kids account would work

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Through 401Kids, families would be eligible to make annual contributions of up to $2,500 per child ages zero to 17.
Low- to moderate-income families would also be eligible for annual federal deposits until a child turns 18. Families with modified adjusted gross income under $75,000 for single tax filers or $150,000 if married would receive $500 per year per child. The contributions would phase out for incomes above those thresholds.
Children in households that are eligible for the earned income tax credit — which aims to reduce the federal tax burden for low- to moderate-income workers — would receive additional aid. That includes an additional $250 per year, even if the EITC is not claimed. EITC eligible households may also receive a $1 to $1 savings match on individual contributions for up to $250 per year.
In addition, families may be eligible for state contributions where applicable.

Children would only be able to use the funds once they turn 18. The money would have to be used for education or training, buying a home or starting a business.
Alternatively, the funds could be rolled over to a Roth individual retirement account or ABLE account for children with disabilities.
Under the plan, a single parent who is eligible for the EITC and who has $40,000 in adjustable gross income may accumulate more than $53,000 by the time a newborn child turns 18. That estimate assumes $21,000 in federal funding, $8,500 in family contributions and $24,000 in investment returns.
The plan includes automatic enrollment starting at birth, with the money invested based on children’s ages.

Other efforts to provide funds for children

It remains to be seen whether the bill can gather sufficient support from both sides of the aisle to become law.
The proposal comes as Congress is poised to consider a new expansion of the child tax credit. Estimates have found the new child tax credit could help about 16 million children from low-income families in the first year, according to the Center on Budget and Policy Priorities.
“I’m not all that surprised to see further child savings accounts introduced at the federal level, especially given the emphasis on child tax credit, basic needs,” said Madeline Brown, senior policy associate at the Urban Institute, a Washington, D.C.-based think tank.

Last year, Democratic lawmakers renewed a push for “baby bonds” that would provide every American child with $1,000 at birth. The funds would then be topped off with up to $2,000 per year based on families’ incomes.
Both child savings accounts and baby bond programs are being put to the test at the state and local levels. Baby bonds specifically target racial wealth gaps, according to Brown. Child savings accounts can also accomplish that goal depending on how they are set up and structured, she said.
“It’s been the last 15 to 20 years that we’ve seen this across the country pickup of these programs,” Brown said.
One experiment called SEED for Oklahoma Kids, which was established in 2007, is the longest-running implementation of a child development account, according to Brown.
Baby bond programs, which are newer, have been established in Washington, D.C., and Connecticut based on Medicaid eligibility, she noted. California has also established a pilot program for children either in long-term foster care or who lost a primary caregiver due to the Covid-19 pandemic.Don’t miss these stories from CNBC PRO: More

Interest rates for credit cards are likely to continue at elevated levels for the rest of 2024, even if the Federal Reserve cuts rates.
Rates for savings accounts aren’t likely to stay at the current highs for much longer.
Rates for auto loans and home mortgages will hopefully moderate as the year progresses.

Getty Images

Inflation is cooling.
Consumer spending continues to be at record highs, while consumer confidence has been trending up. And, after almost two years of rate hikes by the U.S. Federal Reserve, investors are expecting at least a few cuts to interest rates this year.

Their anticipation is understandable: The federal funds rate hasn’t been this high since the early 2000s, and some experts say it seems like the Fed has achieved its goal of a “soft landing,” taming inflation without tipping the economy into a recession.
But consumers looking to borrow money shouldn’t start celebrating just yet, said Greg McBride, chief financial analyst at Bankrate.
“Interest rates took the elevator going up; they’re going to take the stairs coming down,” McBride said.

As the Fed goes into its first Federal Open Market Committee meeting of 2024, here’s what that elevator ride up has looked like over the last 12 months in five major consumer categories: credit cards, savings accounts, certificates of deposit, auto loans and mortgages.

Credit cards

Nowhere has that express rate elevator been more obvious than with credit cards. In March 2022, just before the Federal Reserve started its aggressive rate increases, the average annual percentage rate, or APR, for a credit card in the U.S. was 16.34%, according to Bankrate.

Now, almost two years later, that average is 20.74% — almost 4.5 points higher.
Even as the Fed slowed the pace of increases over the last 12 months, the average APR for credit cards rose more than a full percentage point. And it’s jumped almost three-tenths of a point since the last rate hike in July.

Savings accounts

The bright spot to high interest rates has been for savers, who have finally started seeing bigger rewards for their deposits.
In the last 12 months, the average rate for savings accounts at retail banks has more than doubled, from 0.22% to 0.52%, according to Bankrate.
That average was closer to 0.06% at the beginning of the Fed’s tightening cycle in March 2022.

But the savviest savers can find rates much higher than that, McBride said.
“The number that savers should be focusing on is actually 10 times higher than that average,” he said. “The top yielding savings accounts are paying well over 5%. Federally insured, available nationwide. You can get to your money when you need it. And many of them are available with no minimum deposit.”
A lot of these are online, high-yield savings accounts that you can open on your smartphone. These accounts can be smart for emergency savings that allow consumers to get their money quickly in a pinch.

Certificates of deposit

For savers who don’t need quick access to their money and can lock in their deposit for longer periods, the time to get a certificate of deposit is now, McBride said.
The average rate for a 12-month CD has jumped almost six-tenths of a percentage point in the last 12 months, but those rates likely won’t be around for much longer.

“CD yields have peaked,” McBride said. “They’ve already started to ease back, and that’s going to accelerate as the year progresses. So there’s no benefit waiting: You’re not going to get a better yield later.”

Auto loans

Like credit cards, auto loans for both new and used vehicles have also seen noticeable jumps over the last year, rising half a point for both vehicle categories since the Fed’s last rate hike in July.

McBride expects those rates to come down over the course of this year.
“For car buyers, if you’ve got your ducks in a row, the financing environment is going to be better in 2024 than 2023,” he said.
He cautioned, however, that buying a car is still a major expense, regardless of what interest rates are.
“Car payments are budget busters,” he said. “If you don’t have equity from a previous vehicle and you’re buying a $50,000 or $60,000 vehicle, you’ll be financing that amount. So, even if interest rates were still near zero, that’s going to be a backbreaking monthly payment.”

Mortgage rates

Mortgage rates had a bumpy trajectory in 2023, with the average 30-year fixed rate hitting almost 8% in October.
And while they haven’t fallen back to January 2023 levels, the 30-year fixed rate has been hovering between 6.6% and 6.7% for the last four weeks.

McBride expects that cooling trend to continue for the rest of the year.
“As inflation moderates and the Fed begins to trim interest rates, that’s conducive to see mortgage rates trend lower as the year unfolds,” he said. “They will likely be in the sixes most of the year, but we could very easily see mortgage rates move below 6% year-end.”
That may feel like cold comfort to would-be homebuyers who remember when mortgage rates were closer to 3% at the height of the pandemic, but rates closer to 6% will lower monthly payments or let buyers get more house for their money.
“We’re not going back to the 3% of 2021,” McBride said. “But it is a notable improvement from the 8% that we saw in October 2023.”
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