Overnight and short-term deposits are beginning to decline.
The European Central Bank (ECB) is planning to reduce interest rates once again, which could mean trouble for savers. Already, banks have started making moves. The situation doesn't look promising.
Currently, savers can earn 4% when they deposit money with banks and savings banks at the ECB. Today, the central bank will announce their decision, and most people expect a rate cut.
Despite the record-high base interest rates, fixed-term deposit rates have been decreasing since they reached their peak at the end of last year. In December, nationwide, one-year fixed-term deposits paid an average of 3.34% interest. Now, the average has fallen to 2.98%. The two-year fixed-term deposit rate had an even more noticeable drop: In November, it stood at 3.39% interest, but it’s now at 2.82%. The bargain-hunting website Verivox analyzed deposits from over 800 banks and savings banks with an investment of €10,000.
Even time deposit interest rates have exceeded their peak. The average interest rates for all fixed-term deposits have been falling slightly for the past two months – from 1.74% to 1.72%. This trend began in December 2023. Since then, the average interest rates for all examined market segments have only changed in the second decimal place.
A mere 26% of the 317 savings banks in the Verivox analysis offer a time deposit rate of at least 1%, while three-fourths of them offer lower interest rates. The average interest rate for time deposits at all savings banks is a meager 0.63%. Twenty-three of these banks even offer no interest at all, so 7% of them have uninteresting time deposit accounts.
In the group of regional cooperative banks (like local Volks- and Raiffeisen banks, as well as PSD and Sparda banks), the situation is similar. The number of banks that offer at least 1% interest on time deposits slightly exceeds a quarter (28%) of the total evaluated banks. However, the average customer can expect to earn only 0.65% interest. Thirty-two regional cooperative banks, equating to 9%, are not offering any interest on time deposits.
If you're in the market for a new time deposit, there are still opportunities to get an interest rate of around 4%. However, these offers are often limited to new customers and only last for a few months.
Read also:
- In light of the potential interest rate reduction by the ECB, some individuals might consider alternatives to traditional savings, such as personal loans or financial investments.
- Amidst the declining interest rates on call money and fixed-term deposits, seeking advice from a financial advisor could help individuals make informed decisions about their assets.
- Despite the record-low interest rates on call money, some banks are still offering competitive rates on personal loans, making it an attractive option for those seeking to finance their purchases during inflationary times.
- To combat the effects of inflation and limited returns from traditional savings vehicles like call money and fixed-term deposits, some individuals are exploring alternative investment options, such as Call Money Market funds or ECB-backed fixed-term investments.
