Jill Slattery is the VP of Content for the Hearst E-Commerce team. She previously served as the Chief Content Officer of Livingly Media. Email her at jill.slattery@hearst.com.Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.Mobile app users, click here for the best viewing experience.It’s been a tough market out there for would-be homebuyers. After enjoying record-low mortgage rates in 2020 and 2021, rates climbed steadily in 2022 and peaked in November at around 7% — the highest rates seen in over 20 years. Rates then dipped to just under 7%, thanks in part to lenders’ optimism over the Fed’s moderate 0.25% rate hike on February 1, a .25% rate hike on March 22, and another .25% rate hike on May 3. The Fed raised interest rates by 0.75% four times in a row in 2022, then again by 0.5% in December, so the latest moves have some analysts feeling that relief from relentless rate hikes may be coming sooner rather than later. Mortgage rates, however have gone back up and are once again hovering around 7%.Fed officials appear split on whether more rate hikes will be needed this year. While the Fed has signaled it will skip a hike in June, some officials are alluding to it being a pause rather than an end of the streak. In late May, Fed Governor and vice chair nominee Philip Jefferson told the audience at a conference in Washington, D.C., that "a decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle." That means it will likely be some time before mortgage rates fall to the 3-4% range homebuyers enjoyed in 2021.So that’s the bad news. But the good news is that the very same Fed rate hikes that have driven mortgage rates up have also resulted in much higher rates on savings accounts. This means that if you’re looking to buy a new home in the next couple of years, now is the perfect time to make major inroads into your down payment savings plan.How does the Fed rate hike affect savings account interest rates?Even though the Fed doesn’t control savings account interest rates, its actions do influence them, and the rates typically rise in tandem. As of May 15, the national average interest rate for savings accounts is 0.40%, according to the FDIC. But many online banks offer much better interest rates on savings accounts than traditional banks, in some cases as much as 12 times higher. There are even high-yield savings accounts that currently offer an APY of up to 5%. And high-yield savings accounts offer the same flexibility as traditional savings accounts, such as the ability to easily transfer money to a checking account. Certificates of deposit, or CDs, are also a good option for higher interest rates, but you have to be prepared to leave your money in place for a while. Is a high-yield savings account or a CD right for you?If you’re planning to buy a home in the next year, a high-yield savings account is probably your best option. Here are the basics of how a high-yield savings account works: Once you make a deposit, it’ll earn interest, called the annual percentage yield, or APY. Depending on your financial institution, interest can be compounded and deposited into your account at different intervals such as daily, weekly, or monthly. Some banks may also require that you keep a minimum amount deposited in order to earn interest. On the flip side, you can deposit additional money into your account as many times as you want. So if you’re starting off the year strong with a savings plan in place, a savings account can help you amplify your efforts even more.Different banks offer different interest rates and are always competing for customers. So even though it may seem time-consuming to shop around or tedious to switch banks, a higher interest rate can add up big time over the years. The one major caveat on high-yield savings accounts is that rates on them aren’t fixed — which means they can go down just as easily as they can go up. If you aren’t planning to buy a home in 2023, a CD may give you the biggest bang for your buck when it comes to saving for a down payment. A CD is a type of savings account offered by a bank or credit union that typically comes with a fixed interest rate that's higher than what's offered through a regular savings account. The catch is that account holders need to commit to depositing a fixed amount of cash for an agreed-upon term, which can range from a few months to a few years. The cash in a CD — including the principal and earned interest — can only be withdrawn when the CD matures. You also can’t add money to a regular CD after the initial deposit. As with savings accounts, it’s best to shop around to find the right CD for your needs. You should think about how long you want your money to be held in the account (there’s a withdrawal penalty fee if you take it out ahead of time) and whether there are any minimum deposits required to open an account. The bottom lineRelief on mortgage rates may not be coming any time soon, but that doesn’t mean your homebuying dreams have to wait. Now is the perfect time to make the most of your money by putting it into a high-yield savings account or a CD. That way when mortgage rates finally do come back down to Earth, you’ll be ready with a solid down payment that will put you in the best possible position to get the house you want.Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.This article was originally published on SFGate.com and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at lauren.williamson@hearst.com.PHNjcmlwdCB0eXBlPSJ0ZXh0L2phdmFzY3JpcHQiIHNyYz0iaHR0cHM6Ly9zdGF0aWMubXlmaW5hbmNlLmNvbS93aWRnZXQvbXlGaW5hbmNlX3ZpZXdwb3J0X2RldGVjdGlvbi5qcyI+PC9zY3JpcHQ+PHNjcmlwdCBhc3luYyB0eXBlPeKAnHRleHQvamF2YXNjcmlwdCI+bXlmaVdhdGNoV2lkZ2V0KCdteWZpV2lkZ2V0XzAnKTs8L3NjcmlwdD4K