Decreasing fixed interest rates are occurring.
The European Central Bank (ECB) might decrease the deposit rate once more today, which isn't great news for savers. Many banks have already made preparations for this potential move. Fixed-term deposit rates have plunged to their lowest point in over a year already.
At present, banks and savings banks receiving funds at the ECB are being paid an interest rate of 3.50%. Anticipating the ECB's impending interest rate decision, market participants typically predict another rate reduction.
Since the end of last year, fixed-term deposit rates have seen a noticeable decrease from their peak. Data from the comparison portal Verivox reveals that in November, two-year term deposits earned an average return of 3.39%, but have fallen to 2.51% currently. Across various offers nationwide, the average interest rate reduction is about 0.20 percentage points. Post early September, around two-thirds of financial institutions lowered their fixed-term deposit rates.
Fixed-term deposit rates of 3% or more
Some banking giants in the market still propose fixed-term deposit rates exceeding 3%. Ten national deposit protection scheme-backed banks with excellent credit ratings are still offering two-year fixed-term deposit rates beyond 3%. However, market divergence in interest rates is significant. Nationwide banks offer higher interest rates in comparison to the regional sector.
As of late, Germany's inflation rate has slid to 1.6%, its least since March 2021. Consequently, the real interest rate of an average two-year fixed-term deposit has peaked nearly at 1%. For the fixed-term deposit analysis, around 800 banks and savings banks' terms for an investment sum of 10,000 euros were assessed.
Fixed-term deposit accounts compared
After the key interest rate cut in September, banks also altered daily money rates promptly. Thus far, at least 124 banks and savings banks have lessened their daily money interest rates. Out of a total of 778 banks evaluated, this translates to a 16% share.
Currently, nationwide banks pay an average of 1.64%, incorporating a minor decrease of 0.04 percentage points. Sparkasse (0.59%) and regional cooperative banks (0.61%) pay significantly lower interest rates on average. In both market segments, interest rates have decreased marginally by 0.02 and 0.03 percentage points, respectively, since September.
"Competition among nationwide active banks is fierce. To avoid losing customers in this segment, banks are cautious with interest rate reductions. However, regional banks pay so little interest that they maintain considerable margins, and they didn't need to pass on the ECB interest rate cut directly to their customers," states Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH.
Daily money accounts compared
Individuals seeking a new daily money account can still discover offers with interest rates up to 4.215% or more. Yet, these are usually time-limited promotional offers for new clients that endure for a few months.
In response to the ECB's anticipated interest rate reduction, many banks have lowered their fixed-term deposit rates, including a notable decrease of 0.20 percentage points for two-year terms since September. Despite this, some banking giants still offer fixed-term deposit rates exceeding 3%.
Furthermore, the real interest rate of an average two-year fixed-term deposit has peaked nearly at 1%, which is less than Germany's current inflation rate of 1.6%. This discrepancy means that, in real terms, savers are losing purchasing power through fixed-term deposits.
