U.S. community banks have narrowed the gap with credit unions for the interest rates they charge on several loan products, following rate hikes by the Federal Reserve.
Based on Jan. 20 rates, the community banks that qualified for this S&P Global Market Intelligence analysis are charging a median interest rate of 5.50% on a 60-month new-car loan and 5.75% on a 36-month used-car loan. Meanwhile, credit unions are charging median rates of 5.09% and 4.99%, respectively, for the two loan products.
Difference is closing
The gap has narrowed compared to 2021 and 2022 when the median rates offered by community banks on new-car and used-car loans were within the 4.50% to 4.99% range and the median rates offered by credit unions were between 2.64% and 2.99%.
In 2023, community banks are offering a median rate of 15.49% on credit card rewards, 5.88% on a 15-year fixed mortgage and 6.50% on a 30-year fixed mortgage. On the other hand, median rates at credit unions are at 12.49%, 5.75% and 6.38%, respectively.
On home equity lines of credit, credit unions are charging a median rate of 7.50%, higher than the 7.00% median rate community banks are charging. In 2021 and 2022, community banks had a higher median rate on such products compared to credit unions.
The Fed has raised the federal funds rate by 450 basis points since March 2022, when the central bank started its efforts to cool the inflation rate, compared to near-zero rates in the preceding two years. The most recent increase, announced Feb. 1, was 25 basis points, the smallest hike since the beginning of the cycle.
Rates per region
Compared to community banks in other regions, mid-Atlantic community banks are offering higher median rates on 60-month new-car loans, 36-month used-car loans and home equity lines of credit at 5.75%, 6.25% and 7.50%, respectively.
On 15-year fixed mortgages, community banks in the West are charging a higher rate at 6.00%. On 30-year fixed mortgages, community banks based in the Midwest, Southeast, Southwest and West are offering higher rates at 6.50%.
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Compared to credit unions in other regions, those in the Northeast offer higher rates on 60-month new-car loans at 5.25%, and credit unions in the West charge higher rates on 36-month used-car loans at 5.24%. On home equity lines of credit, credit unions in the Midwest, Southeast and West regions offer higher rates at 7.50%.
Credit unions in the Midwest charge higher rates on 15-year fixed mortgages at 5.88%, and credit unions in the same region as well as the Northeast, Southeast and Southwest offer higher rates on 30-year fixed mortgages at 6.38%.
The median rate offered on credit card rewards is higher at community banks and credit unions in the Northeast at 18.74% and 14.24%, respectively.
Rates at some community banks
Among the largest community banks by total loans and leases with rate data available for at least five of the six aforementioned products and with loan-to-deposit ratios above 40% at Sept. 30, Youngstown, Ohio-based Premier Bank is charging the highest rates on 60-month new-car loans and 36-month used-car loans at 7.44%, on 15-year fixed mortgages at 6.50% and on 30-year fixed mortgages at 7.50%.
On home equity lines of credit, Englewood Cliffs, N.J.-based ConnectOne Bank and Topeka, Kan.-based Capitol Federal Savings Bank are offering the highest rates at 8.00%.
Seattle-based HomeStreet Bank, Newark, Ohio-based Park National Bank and Indiana, Pa.-based S&T Bank are charging the highest rates on credit card rewards at 18.74%.
Among credit unions qualified for this analysis, Colorado Springs, Colo.-based Ent CU is offering the highest 60-month new-car loan and 36-month used-car loan rates at 6.74%. Valencia, Calif.-based Logix FCU is charging the highest rates on home equity lines of credit and credit card rewards at 8.25% and 16.99%, respectively.
On 15-year and 30-year fixed mortgages, Chubbuck-based Idaho Central CU is offering the highest rates at 6.63% and 7.00%, respectively.
