Even a year after the turnaround in interest rates in the euro area, most savers are not able to benefit from it. However, there are definitely differences between fixed-term and overnight accounts.
Zero interest rates at every fifth bank: One year after the start of the rapid turnaround in interest rates by the European Central Bank, 141 of 738 banks in Germany still have zero interest rates on call money. This emerges from a current evaluation of the comparison portal Verivox.
Although almost all credit institutions quickly abolished their negative interest rates after the ECB’s penalty interest on bank deposits was abolished, according to Oliver Maier, Managing Director of Verivox Finanzvergleich: “But even a whole year later and after meanwhile eight interest rate increases in a row, a considerable number of banks still offer savers no interest at all on their overnight money accounts.”
Many advertise with new interest rate offers
The turnaround in interest rates had made savings attractive again for banks and savings banks. Many institutes advertise for funds with ever new interest rate offers. According to the Verivox calculation, the average interest rate paid on call money accounts nationwide is currently 1.31 percent.
A year ago, interest rates were just above zero: at 0.05 percent at the beginning of August 2022. “In order to hold their own in the competition for savings, the financial institutions operating throughout Germany feel compelled to keep improving their conditions,” analyzed Maier.
Zero interest at savings banks
Zero interest rates are still widespread, especially among regional money houses: 80 of 350 cooperative banks have an overnight interest rate of 0.00 percent for an investment amount of 10,000 euros. That is almost every fourth institution from the group of Volks- und Raiffeisenbanken as well as the PSD- and Sparda-Banken. In the case of the savings banks, call money investors go away empty-handed at 58 of 309 institutes, which is a share of around 19 percent. “Sparkassen and Volksbanks speculate much more on the loyalty of their customers,” says the managing director of Verivox Finanzvergleich.
Consumer advocates from several federal states recently called on savings banks to “accept deposits from consumers in the amount of the statutory deposit insurance and to pay interest”. At a conference in early July, bank representatives defended themselves against accusations that the increased interest rates were being passed on to savers too hesitantly. “In fact, we have protected most of our customers from negative interest rates for many years,” said Cornelius Riese, co-head of DZ Bank. After the “paradigm shift” of the rapid turnaround in interest rates, the banking sector “now needs a certain adjustment phase until the system is in balance again”.
While there is hardly any interest on call money, fixed-term deposit accounts bring savers significantly better conditions. Fixed-term deposits with a term of two years currently yield an average of 2.96 percent for banks that are active nationwide. That’s almost four times what it was in early August 2022, when it was just 0.82 percent.
Key interest rate already at 4.0 percent
Driven by extremely high inflation, the European Central Bank (ECB) increased interest rates in the euro area in July 2022 for the first time in eleven years. Higher interest rates make loans more expensive, which can curb demand and counteract high inflation rates. The key interest rate at which banks can get fresh money from the ECB is now 4.0 percent.
The euro currency watchdogs abolished the negative interest rate on deposits that banks park with the central bank a year ago. Banks are now getting 3.5 percent interest on deposits again. Another rate hike has been announced for the next ECB meeting on July 27th.