Sales of annuities through banks in September lost their momentum after hitting a peak for the year in March. According to the Kehrer-Jackson Monthly Bank Annuity Sales Survey, variable sales maintained August levels but fixed annuity sales sank, driving total annuity sales down.

Financial institutions sold $2.6 billion worth of fixed and variable annuities in September. This represents an 8% drop for the month and a 17% dive from the previous September, when fixed annuities compensated for stalled variable sales at banks. “Variable sales in September were flat, but fixed annuities really fell behind,” says Janet Cappelletti, Associate Research Director for Kehrer-LIMRA.

Bank-sold fixed annuity production tumbled 17% in September, to $1.2 billion, the lowest level since January. Fixed annuity premium was 41% below its rally in in September 2009.

“This is the first time we’re seeing fixed annuity sales fall below variable in the bank channel in several years.” says Cappelletti. “The last time variables outsold fixed annuities at financial institutions was January of 2008.”

This isn’t surprising given that fixed annuities are now offering 10 basis points less than five-year CDs, according to the Kehrer-LIMRA Bank Fixed Annuity RateWatch. The spread between the two products fell from 37 basis points in September 2009 to negative 10 points in September 2010.

Meanwhile, variable annuity sales at banks maintained this summer’s levels. In September banks sold $1.4 billion, consistent with August. Perhaps reflecting the rising market, VA sales jumped 28% compared with September 2009, when they lingered at $1.1 billion for much of the year.

Banks sold $0.88 in fixed annuities for every dollar of VAs in September—compared with $1.05 to one at the beginning of the year.

The amount of mutual fund sold through banks improved in September and accounted for two-thirds of dollars invested in packaged products. September‘s  $5.3 billion in production was a 6% increase over August and 13% higher than the previous September.