Housing rates have notably gone up, reaching highs that we haven't seen since the early 2000s and pricing budding homebuyers out of the market, but homeowners' mortgages tell a different story. A June 2023 report from real estate firm Redfin found that roughly four in five homeowners with a mortgage have an interest rate below 5% and nearly one-quarter have a rate below 3%.
As we've learned, it's these low rates homeowners have locked in that are contributing to the shortage of housing supply. For homeowners staying put, however, you can make the best of the situation by forgetting about paying off your low-rate mortgage early and instead putting any extra cash into a savings account offering a higher return than your home is costing you.
High-yield savings accounts offering over 4% APY
Since the majority of American homeowners with a mortgage are paying less than 5% interest, we looked at what high-yield savings accounts offer a return above that. With a high-yield savings account, your cash is accessible and safe through an FDIC-insured bank.
The three online high-yield savings below currently offer at least 4.01% APY with no real minimums and no caps, so you can earn this above-average interest on all balances. It's better to act sooner than later, however, since these accounts have variable rates and can change at any time.
Newtek Bank Personal High Yield Savings
Annual Percentage Yield (APY)
4.35% APY
Minimum balance
$0.01 to earn interest
Monthly fee
None
Maximum transactions
Up to 6 free withdrawals or transfers per statement cycle; transaction amount limits apply; withdrawals from your account can only be transferred to the original external funding source
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
Only a business checking account
Offer ATM card?
Yes, if have a Newtek checking account
Terms apply.
Western Alliance Bank High-Yield Savings Account
Annual Percentage Yield (APY)
3.80% APY
Minimum balance
$1 minimum deposit
Monthly fee
None
Maximum transactions
Up to 6 transactions each month
Excessive transactions fee
The bank may charge fees for non-sufficient funds
Overdraft fee
No overdraft fee
Offer checking account?
No
Offer ATM card?
No
Terms apply.
Lock in the high rate: CDs offering over 5% APY
The top CDs today are staying competitive with high-yield savings so they're worth paying attention to as well. With a CD, you can lock in a high interest rate and not worry about whether it will go up or down in the future. CDs are less accessible than high-yield savings, however, because you can't touch your funds until the CD term is up.
CFG Bank currently has a 12-month CD offering 4.15% APY — one of the highest we've seen. There's a $500 minimum deposit to get started and maintain to earn the interest. If you're comfortable locking up your funds for one year, this is a smart move for your money.
CFG Community Bank CDs
Annual Percentage Yield (APY)
From 4.05% to 4.17%
Terms
From 12 months to 60 months
Minimum balance
$500 to open and start earning interest
Monthly fee
None
Early withdrawal penalty fee
Early withdrawal penalty depends on the term length; withdrawing within six days of account opening will cost you a 7-day interest penalty
Terms apply.
Those who don't want to be tied to a minimum deposit should consider Synchrony Bank, which is currently offering a 14-month CD at a rate of 4.00% APY. Though it's a bit lower of an APY than CFG Bank's, you lock in four more months of that still pretty solid return.
Synchrony Bank CDs
Annual Percentage Yield (APY)
From 0.25% to 4.35% APY
Terms
From 3 months to 60 months
Minimum balance
None
Monthly fee
None
Early withdrawal penalty fee
There may be an early withdrawal penalty if you withdraw funds from the principal prior to the CD maturity date (the last day of the CD term). The penalty is applied to the amount of principal withdrawn (there's no penalty on interest). For the No-Penalty CD, early withdrawals are not permitted within the first 6 days after account funding. Following that, only withdrawal of the entire balance is allowed.
Terms apply.
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest for your CD type in effect at that time.
Compare offers to find the best savings account
Bottom line
Homeowners with mortgages can take advantage of their already-locked-in low housing rate and put any extra funds into a high-yield savings or CD that offers a greater return.
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