- Interest rates stoop to their lowest level since the early spring of 2023.
Right before the European Central Bank (ECB) decides on interest rates this Thursday, savers are seeing the lowest interest rates on fixed-term deposits in over a year. According to Verivox's analysis, two-year term deposits are now averaging 2.68%, which is the same low interest rate we saw in May 2023. However, instant access account interest rates remain relatively unchanged, as reported in the study with a reference date of September 6.
Since their peak in November 2023, these fixed-term deposit interest rates have dropped by an average of 0.71 percentage points. Verivox frequently examines the instant access and fixed-term deposit interest rates of around 800 banks and savings banks, totaling 10,000 euros.
Banks are anticipating an ECB interest rate cut this Thursday
The interest rates for savings accounts are heavily influenced by the ECB's monetary policy. Currently, banks receive a deposit rate of 3.75% for funds they keep at the central bank. With the easing inflation in the eurozone, a cut is widely expected on Thursday, followed by further interest rate adjustments in the coming months. If the ECB reduces their deposit rate, banks usually pass this on to their customers.
"A cut in the key interest rate is already factored into the current fixed-term deposit conditions," says Oliver Maier, CEO of Verivox Financial Comparison GmbH. "In the coming weeks, the current trend is likely to continue, and fixed-term deposit interest rates will continue to drop at a moderate pace."
Lower inflation is beneficial to savers
Despite a significant decrease in inflation, the situation for savers has improved. After accounting for inflation, which was 1.9% in Germany in August, there is an average real yield of 0.78% on two-year fixed-term deposits. "A year ago, even the best offers in the market didn't provide a positive real return, saving were losing value," says Maier.
Little change in instant access account interest rates
There has been minimal change in instant access account interest rates, according to the report. Verivox last reported nationwide offers at an average of 1.68%, slightly higher than their initial August value of 1.66%. Savers can get significantly less from savings banks (0.61) and regional cooperative banks (0.63). "Many banks are waiting for the central bank's decision," said Maier. If the ECB cuts interest rates, many banks are likely to quickly follow suit and reduce the interest rate for instant access accounts - as they did after the last interest rate step by the central bank in June.
The spring of 2024 sees fixed-term deposit interest rates continuing to drop at a moderate pace, as predicted by Oliver Maier. Due to the ECB's anticipated interest rate cut, banks are expected to pass on the reduced deposit rate to their customers, affecting the interest rates for savings accounts.
Despite the decrease in inflation, savers in 2024 still struggle to earn a positive real return on their two-year fixed-term deposits, with the situation little changed from the previous year. The spring of 2024 also brings minimal change in instant access account interest rates, with savers continuing to earn less from savings banks and regional cooperative banks compared to major banks.
