CDs Continue to Freefall at CUs
While total savings are up 6.0% over the past year at credit unions, certificates of deposits remain on a steady decline.
CUNA Mutual Group's June Credit Union Trends Report, which tracked data through May, showed a 5.7% annual decline in CDs. The year-to-date decline is 3.2%. Industry estimates revealed the average rate paid on one-year CDs was just below 1.5% in May. This is down 73 basis points over the past year and is just 70 bps above money market returns.
"Depositors are clearly experiencing yield frustration. Some are opting for liquidity as the combination of money market accounts, share drafts and regular shares is up 12.4% over the past year," wrote CUNA Mutual Chief Economist Dave Colby in the report. "Some are paying down debt and, anecdotally, some are lending to or supporting family members during these economically challenging times."
CUNA Mutual expects interest rates will remain low. When combined with some CUs intentionally discouraging additional deposit inflows, to manage their capital ratio, forecast savings and asset growth is not robust, Colby noted. In the current environment, savings and asset growth may remain below trend for an extended period, he added.