WASHINGTON – Falling market rates and lack of competition have combined with declining non-interest income to force credit union savings rates to all-time lows.
Average rates paid by credit union on regular shares and interest-bearing checking fell last week all the way to a meager 0.17%; while rates paid on money market funds fell to just 0.2%, according to DataTrac, which follows rates for more than 8,000 depositories, including 1,000 credit unions. CD rates also plunged to new lows, with the average paid on six-month CDs falling to just 0.33%; for one-year CDs to only 0.49%; and for three-year CDs just 1%.
Brian Turner, director of Catalyst (Corporate) Strategic Solutions, said the record low savings rates haven’t seemed to harm credit unions in their ability to attract new shares, noting that $43 billion of additional shares have poured into credit unions in the first six months of the year. “There’s just not any competition for cash; everybody is cash-flush right now,” Turner told the Credit Union Journal this morning.
Despite the record-low payouts, credit union rates are still higher than those paid by banks, albeit not as much as by historical standards, he noted.
The bank rates for regular savings, for example, average just 0.13%; for interest-bearing checking a miserly 0.01% (one basis point); for one-year CDs 0.37%; and for three-year CDs just 0.77%, all lower than credit union rates.
The record-low rates, also known as cost-of-funds, is allowing credit unions to fund new loans at low rates and means that credit unions are well-positioned for an increase in market rates, according to Turner. “A rising-rate environment is going to be very good for the industry,” he stated, explaining that new opportunities to invest funds at higher rates are going to provide greater margins.
