Shine Is Dimming On CU Rates

TORONTO – Credit unions are losing their competitiveness in the deposit products as rising short-term rates keep pushing up the returns offered by the competition, several leading credit union economists warned during NAFCU’s annual convention last week. Average rates paid on share drafts (1%), regular shares (1.7%), money market accounts (2.23%) and one-year CDs (2.94%), continue to lag near all-time lows, even as the Federal Reserve has pushed the rate on overnight FedFunds up to 4.5% over the last two years, noted Bob Burrell, chief investment officer for WesCorp FCU. “Credit unions are no longer competitive and we no longer have the best deals in town, in many instances,” said Burrell. The challenging rate environment over the next few years will mean there will be more opportunities for credit unions to grow their loans, than their deposits, said Burrell. He forecast stagnant growth in the core credit union savings products, regular shares and share drafts. “I think we’re going to see consumers move away from traditional products that credit unions normally offer,” he said. “The question is: will it be towards on-balance sheet products or off-balance sheet-type products.” David Colby, chief economist at CUNA Mutual Group, said the rate environment will add to the pressures credit unions are feeling to expand their membership.