Market Rates Insight Research Shows Banks Stabilizing Interest Rates to Draw Deposits from the Consumer Market

Business Wire, Feb 29, 2008

This Time Around, Banks Increasingly Take Their Guidance from the Market Rather than the Fed

SAN ANSELMO, Calif. -- According to the latest findings from Market Rates Insight (MRI, www.marketratesinsight.com), a leading research firm that tracks rates for deposits, loans, and fees to help financial institutions price with precision, banks are not dropping interest rates in lock-step with the reduced interest rates set by the Federal Reserve Bank. After seriously adjusting rates downward on deposit products in January, banks are slowing interest rate reductions in February in what MRI experts see as an attempt to solicit new deposits from consumers and stay competitive.

The latest MRI reports reveal that the average deposit rates for money market accounts, CDs, Jumbo CDs, and other savings products dropped dramatically in January but slowed in February. The latest reports show that for one-year CDs, for example, dropped from 3.32 percent at the close of 2008 to 2.67 percent at the end of January, a relative change of -19 percent, but only dropped to 2.36 percent in February, a relative change of -12 percent.

Similarly, for one-year Jumbo CDs dropped from 3.51 percent at the close of 2007, to 2.82 at the end of January (a relative change of -20 percent), but only dropped to 2.52 percent in February (a relative change of -10 percent).

For Savings Accounts, rates dropped from 2.64 percent at the close of 2007 to 2.23 percent at the end of January (a relative change of -16 percent), but only dropped to 2.09 percent at the end of February (a relative change of -6 percent).

"Things are calming down, and banks are paying less attention to the Fed and turning to the market to bolster their deposits," said Rick Barham, founder and CEO of Market Rates Insight. "Today's banks are competing with investment brokers and other institutions for consumer savings, and rather than following the Fed, banks are opting to keep their interest rates higher on both deposits and loans in order to appeal to the retail market and maintain spread. It's also interesting to note that CDs seem to be the products that are rebounding - so it appears that banks are increasingly more comfortable marketing term accounts (e.g. CDs) vs. non-term (e.g. high-yield savings)."

About Market Rates Insight

For more than two decades, Market Rates Insight (MRI) has been helping subscribers price with confidence by providing banks, thrifts, credit unions, and other financial institutions with accurate market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fee and feature studies, new product alerts, and market share and money fund reports to give subscribers the intelligence they need to profitably react to emerging trends. MRI's products include customized, web-enabled market research tools that report on rates, as well as online searchable databases, gauges, alerts, and dashboards that aggregate key client data to provide real-time views on how they stack up against market competitors.

Market Rates Insight is located in San Anselmo, California. For more information, see www.marketratesinsight.com.