Quote:
Originally Posted by UteChief
5.6% is really high for a 5-year term, but you’re essentially correct. A bank will use the money you have in a CD and lend it out longer term. My previous bank would buy CDs on the secondary market to make USDA guaranteed loans, but the rates were typically variable limited to the term the CDs were purchased for. You can review a banks net interest margin to see how good a bank is at this.
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My 5.6 was actually only a one-year, but they called it after six months. So it wasn't a huge loss, but it worries me a bit about other CDs that I'm holding. If they all start doing that, particularly the ones that are 3+ years, it's going to screw me over.