Shine Is Dimming On CU Rates

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TORONTO - (07/17/06) – Credit unions are losing theircompetitiveness in the deposit products as rising short-term rateskeep pushing up the returns offered by the competition, severalleading credit union economists warned during NAFCU’s annualconvention last week. Average rates paid on share drafts (1%),regular shares (1.7%), money market accounts (2.23%) and one-yearCDs (2.94%), continue to lag near all-time lows, even as theFederal Reserve has pushed the rate on overnight FedFunds up to4.5% over the last two years, noted Bob Burrell, chief investmentofficer for WesCorp FCU. “Credit unions are no longercompetitive and we no longer have the best deals in town, in manyinstances,” said Burrell. The challenging rate environmentover the next few years will mean there will be more opportunitiesfor credit unions to grow their loans, than their deposits, saidBurrell. He forecast stagnant growth in the core credit unionsavings products, regular shares and share drafts. “I thinkwe’re going to see consumers move away from traditionalproducts that credit unions normally offer,” he said.“The question is: will it be towards on-balance sheetproducts or off-balance sheet-type products.” David Colby,chief economist at CUNA Mutual Group, said the rate environmentwill add to the pressures credit unions are feeling to expand theirmembership.

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