More and more savers are investing in fixed deposits again. According to the consulting firm PwC, German banks are seeing a record increase in fixed-term deposit accounts. But the yield remains comparatively low.
Since the interest rate turnaround in July 2022, German savers have invested in fixed-term deposits worth 180 billion euros – the auditing firm PwC has evaluated this based on Bundesbank data. According to PwC, this is a record increase in fixed-term deposits for German banks. In previous years, the volumes had been declining. A form of investment that has been neglected for a long time is making a comeback: the fixed-term deposit account.
According to PwC partner Daniel Wildhirt, fixed-term deposits currently combine investors’ desire for higher interest rates and banks’ interest in better planning of deposits due to a longer term. The “Handelsblatt”, which previously reported exclusively on the figures, comes to a total of 535 billion euros that private customers and companies had invested in fixed-term deposits with German banks by March of this year.
The turnaround in interest rates is now reaching the savers
With fixed-term deposits, customers set a certain term for their money and are guaranteed a previously agreed interest rate at the end of the period. However, the money is tied up for the entire term. According to experts from the online comparison portal Verivox, the turnaround in interest rates is now also reaching savers. “In the last few weeks and months, interest rates for overnight and fixed-term deposits have risen massively, and there is no end in sight to the rally,” says Verivox. The intense competition is forcing the banks to constantly improve their conditions.
Across from tagesschau.de Verivox Managing Director Oliver Maier said: “Those who compare offers can secure even higher interest rates. Top banks from other EU countries and Germany are currently paying up to 4.0 percent interest for fixed-term deposits with a term of two years. Investors can thus up to 816 euros in interest income after two years.”
According to PcC banking expert Wildhirt, interest rates on fixed-term deposits have risen by more than two percent on average over the past 12 months. “However, it should be noted that the currently very high inflation continues to overcompensate for the rise in interest rates. The real interest rate after inflation is therefore still negative.” Even with fixed-term deposits, investors are still suffering from a loss of purchasing power.
Inflation eats away at interest income
According to Verivox, the average interest rate for a two-year fixed deposit is currently 2.06 percent per year. There is an average of 0.35 percent for overnight money. In view of an inflation rate that averaged 7.9 percent in 2022 and was 7.2 percent in April this year, this is still negative on balance. This has an even greater impact on the current account, where most Germans still park most of their savings.
Not all banks offer attractive fixed-term deposit conditions – and thus pass on the rise in interest rates by the European Central Bank (ECB) to their customers. According to Verivox, however, the number of institutes doing it is increasing. The comparison portal is now more than 426 banks with offers for two-year time deposits. That is more than three times as many banks and savings banks as a year ago.