High-Rate CD Attrition May Be Signaling What’s to Come

With the Federal Reserve initiating the falling rate cycle in September with a decisive 50 bp rate decrease, the era of banks offering high-rate 500bp+ CDs is quickly drawing to a close. FIs have already begun decreasing CD rates across the board, and maturing CDs that were booked at 5.00%+ are rolling into significantly lower rates today. For bankers, the question becomes how many of those high-rate CDs will stay put and how many will leave. 

Data from Curinos’ September Retail Deposit Analyzer suggest an uptick to the latter: Attrition rates for high-rate CDs increased to 18% from a stable 15% in prior months (see chart). This is in contrast to customers holding maturing CDs at lower rates, whose behavior has remained largely unchanged. But with rates likely to decrease further in the coming months, we’ll be monitoring closely to see whether the increased attrition of higher- rate 500bp+ CDs is a harbinger for the rest of the CD book once they mature into a notably lower-rate CD. 

One thing is clear: The right data-driven analytics will greatly benefit pricing decisions that strike the right balance between lowering rates for different cohorts of CD holders in the coming months to maintain margin, without triggering a spike in attrition.