Building societies attract higher interest rates. However, with the old contract, you can build cheaper

A total of five building societies on the Czech market register over 3.2 million contracts this year. Last year’s barometer of the popularity of savings of the Association of Czech Building Societies showed that this type of saving money was the most popular savings and investment product after precious metals.

This is mainly due to state support, which amounts to 10 percent of the amount saved in the relevant calendar year for all contracts, but not more than 20,000 crowns. It is therefore possible to obtain up to two thousand crowns from the state every year, with a deposit of 1,667 crowns per month. However, the client will receive state support only if he observes the savings period, which is six years. Therefore, if the client terminates the savings contract earlier, he will completely lose the state support.

In the past, the appreciation of the money saved was also interesting for the “building”. However, over the years, interest rates have dropped to around one percent. The benefits of savings were thus determined primarily by special offers and account management fees.

However, since the end of last year, building societies have started to compete a little again in interest rates. In response to the rising basic interest rate of the Czech National Bank, which is currently 5.75 percent, some have added half a percent to savers, others four times as much.

Old contracts have low rates of potential credit

Under the conditions and a combination of state support, higher interest rates and various bonuses, clients can increase their savings by more than six percent.

However, higher interest rates only apply to newly concluded contracts; it is not possible to request that a higher rate be credited to the old contract. However, a possible premature termination is prevented by the aforementioned state aid, which the client would lose retrospectively.

Just as in the case of loans there is a fixation period for which the agreed interest is paid, so in the case of building savings there is a binding period which is intended to protect both parties against possible unilateral changes.

“In the case of an older contract, it depends on what stage it is in. If the binding period of six years has already elapsed, the client does not lose the credited state aid upon its termination. If the tying period has not yet expired, for a contract younger than two years, there is also a fee for early termination of the contract, “warns spokeswoman of the building society Moneta Zuzana Filipová.

It is therefore necessary to consider whether it is worth terminating the contract at a lower rate. “The client may have several building savings contracts at the same time and, if necessary, he can therefore establish a new one with a higher rate and have the binding period expire on the older contract,” adds Filipová.

An old low-interest contract can have one major bonus. And low interest rates in the case of a loan. “Clients with an older contract have a lower rate on deposits, but at the same time they also have a lower rate on the loan, which is guaranteed for the entire period of its repayment,” says Filipová. This applies to all building societies.

For example, at Raiffeisenbank stavební spořitelna, clients with an old contract can use a building savings loan with an interest rate of 2.99 percent. “And this is a significant benefit compared to interest rates on today’s market,” says Tereza Kaiseršotová, a spokeswoman for the savings bank.

It is this savings bank that currently has one of the highest rates offered – three percent, when concluding a new contract by 2027 after meeting the conditions. “The special interest rate applies if the client concludes a new building savings contract in the Savings tariff and with a target amount of at least CZK 200,000,” says Kaiseršotová.

He adds that the client must send 20,500 crowns to the savings account every year for a period of six years. “Thanks to this, the client will secure both a higher premium rate and maximum state support. In addition, when arranging a Raiffeisenbank current account, the client receives a premium of two thousand crowns and can achieve a total annual yield of up to 6.36 percent,” adds Tereza Kaiseršotová.

They also raised the interest rate in Buřinka from 1 June. “It is now 2.5 percent a year. The rate is available to all clients and is not subject to any other conditions,” says Kopřivová, a spokeswoman for the savings bank.

In addition, a new client can get a bonus of 2,500 crowns if they make savings online by the end of June. “The condition for obtaining the bonus is to observe a minimum savings period of at least two years. The appreciation of deposits thus reaches up to 6.5 percent per year when the bonus, maximum state contribution and 2.5 percent interest on deposits are included, including all fees,” Kopřivová calculates.

ČSOB stavební spořitelna now has a rate of 1.5 percent. Bank spokesman Patrik Madle apologizes for the relatively low amount by the fact that the bank has attractive bonuses for savings.

“Building savings can be attractive in other ways than just the interest rate. The client can get a premium of two thousand crowns when closing a building with a target amount of 500 thousand crowns and higher, or 1000 crowns with a target amount of less than half a million. And when arranging a current account or a pension, the client can get another two thousand for the building, “says Madle, according to which the total annual appreciation of the client’s deposits can be 5.8 percent per year.

When setting up a building savings contract, it is necessary to count on a fee of one percent of the target amount, but more and more often, savings banks are offering free account opening as part of various events. ČSOB and Modrá pyramida KB even abolished the fee completely. Clients usually pay around CZK 300 per year for account management, see the table.

From January to the end of April this year, building societies provided loans worth approximately 28 billion crowns, which is a year-on-year decrease of 15 percent. At the same time, however, they saw an increase in interest in new contracts. They closed about 172,500 of them, four percent more year-on-year.

At present, however, there are more and more opinions that state support for building savings should be abolished as part of the search for savings in the state budget.

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