But, when the Fed Funds Rate declines, so to do rates that banks pay savers.

Take a look at this chart of 1 year CD rates from BankRate.com

As you can see, rates have dropped like a stone, mirroring the Fed Funds rate.  The average yield for a one year cd is now 3.47%.   By doing a little digging, you can still find rates higher than this average. 

Bankrate.com allows you to search for the highest yields by deposit product type.  A quick search today shows that MetLife Bank is offering a 4.02% rate with a 4.10% APY, but to get that rate you have to have a $25,000 minimum deposit.  GMAC Bank has the second highest rate at 3.83%, with an APY of 3.90%, which only requires a $500 minimum deposit.

What about money markets and savings? 

As you can see, a similar trend.  However, after searching BankRate again, I found that there are a number of institutions still offering relatively high rates.  For instance, AmTrust Direct is offering a savings account with a 4.51% rate and a 4.60% APY.  E*Trade Bank is offering a savings account with a 4.31% rate  and a 4.40% yield.  The highest money market yield is being offered by Flagstar Bank, at 4.32% with a 4.40% yield.

Remember that banks can change rates on savings and money market accounts at any time, while certificates of deposits have a contractual rate for the term of the cd.

Takeaway:  Do your homework!  You should always shop rates when you are looking to move, or add to, you short term savings.

Originally posted on pfhacks.com: Searching For Yield

• Applications to refinance are up 92% since the beginning of November, while purchase applications are up 7%.
• Refinancing applications represented 66% of the total last week.
• The average rate for a 30 year fixed mortgage was 5.49% last week.
• The average rate for a 15 year fixed mortgage was 4.96%.

The takeaway is that mortgage rates are very low compared to their historical average. Now might be a great time to refinance, especially if you have an adjustable rate loan.

To illustrate this point, I have included a chart from the St. Louis Federal Reserve Bank, that shows the interest rate on 30 Year fixed mortgages going back to the early 1970’s.

Note: This chart ends with rates as of 12/01/07.

Originally posted on pfhacks.com: Falling Mortgage Rates Creating Refinancing Boom

According to Bankrate.com, the National Average rate for a 15 year fixed mortgage was 4.93% over night, and 5.42% for a 30 year fixed mortgage.

As illustrated by these charts, these rates are the lowest we have seen in over two years.

3 Year Chart of 15 Year Fixed Rate Mortgages:

3 Year Chart of 30 Year Fixed Rate Mortgages:

I hope this provides an opportunity for many of the individuals that took adjustable rate loans to refinance into a fixed rate loan.

Originally posted on pfhacks.com: Mortgage Rates Lowest In Over Two Years

The rule of 72 allows one to quickly determine how long it will take, at a given interest rate, to double your money on and investment.

For instance, if you have $1000 that is earning interest at the rate of 10% per year, how long will it take for the investment to grow to $2000, assuming all interest payments are reinvested at the same rate?

Your first instinct may be to say that the it will take 10 years, since 10% of $1,000 is $100, and it will take 10 years to add an additional $1,000 in earnings.

The actual time is approximately 7.2 years, which we get by dividing 72 by our interest rate 10. The reason this works is due to the magic of compound interest.

Interest compounds as you begin to earn interest on previous interest. Returning to our example, at the end of year one, you will have $100 in interest earning adding back to the principal balance giving you $1,100. At the end of year 2, you will have $110 in interest income. The additional $10 of income was produced from you adding the $100 earnings of year one back to the principal balance. As your earnings on your “retained” interest grows, you will quickly see an escalation in yearly interest income, culminating in your initial investment doubling in about 7.2 years.

To summarize, to determine how long it will take for an investment to double given a fixed interest rate, divide 72, by the expected rate of return (the interest rate).

Originally posted on pfhacks.com: The Rule of 72 and Compound Interest