Research Shows Interest Expense Decreasing as Top Deposit Rates Decline

by tom 22. February 2011 15:46

imageThe latest National Pricing Indicator report from Market Rates Insight reveals that both the maximum and minimum APYs for deposit products continue to decline, pushing the average APY closer to bottom rates, especially for liquid accounts.

According to the latest findings, in the last six months from August 2010 to February 2011, the national maximum APY for term accounts dropped from 2.21 percent to 1.85 percent, a decrease of 36 bps or 16 percent. At the same time, the minimum APY for term accounts dropped from 0.25 percent in August of 2010 to 0.14 percent in February, a decrease of 11 bps or 45 percent. These decreases pushed the national average APY down 21 bps, from 0.96 percent in August to 0.75 percent in February (see Figure 1).image

The maximum APY for liquid accounts also declined in the last six months from 1.62 percent to 1.49 percent, a decrease of 14 bps or 8 percent. The minimum APY did not change as it is near zero at 0.01 percent.

The decrease in the maximum APY pushed the national average APY for liquid accounts closer to the minimum level – from 0.26 percent to 0.21 percent or a drop of 5 bps (see Figure 2).

What this indicates is that financial institutions are lowering their interest expenses, especially on their highest yield products. Rollover maturing CDs are now yielding 36 bps less on the top rates, and 21 bps less on the average rate than they did six months ago.

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