On June 15, 2023, the ECB will announce whether it will raise interest rates again. As a result of the last interest rate increases, the effective annual interest rate for consumer loans has risen to 8.09 percent on average, according to the Bundesbank. (2) This rise in interest rates could moderate in the coming months. This is shown by a survey by the credit comparison portal smava.de among banks in Germany. (1) The majority of the banks surveyed (77%) expect a key interest rate increase of up to 0.25 percentage points. However, 46 percent assume that lending rates in the market will remain constant overall. However, 54 percent expect interest rates on loans to rise. “Not every bank passes on the rate hike to borrowers. The interest costs for a loan also depend heavily on which bank you go to. Anyone who simply goes to a bank pays around 8 percent interest on average. However, there are still loans with interest rates between 5 and 6 percent and well below that. Depending on the loan, several hundred or thousands of euros more or less can become due. A bank comparison helps to find the right bank,” says Alexander Artopé, CEO of the credit comparison portal smava.de.
Benefit from interest rate differentials between banks
“Anyone who focuses on the interest rate differences between banks in the current situation and compares offers from different banks is more likely to pay less for a loan than those who do not compare loans. That’s because not all banks have passed on the rate hikes of recent months to borrowers to the same extent. This will probably be the case again after the current ECB decision,” says Alexander Artopé, CEO of the credit comparison portal smava.de.
Fictitious calculation example 5,000 euro loan over 36 months
- Interest costs cheap loan (5.5%): €424.39
- Interest cost of expensive credit (8.0%): €617.39
- Difference: €193.00
Fictitious calculation example 10,000 euro loan over 84 months
- Interest costs cheap loan (5.5%): €2,017.50
- Interest costs on expensive credit (8.0%): €2,975.90
- Difference: €958.40
Looking back in times of low interest rates does not help
“It doesn’t help to know that loans are more expensive today than they were a year ago. Looking back at times of low interest rates does not make loans cheaper today, nor does it help to find a loan that is cheap under current conditions. This can only be achieved through a comprehensive credit comparison,” says Alexander Artopé, CEO of the credit comparison portal smava.de.
More bank overdrafts – they too are affected by interest rate increases
In May 2023, an average of 9.3 percent of people aged 18 and over in Germany overdid their accounts (05/22: 8.6%). (3) More than every second (60.0%) of them was in the red with more than 1,000 euros in May 2023 (05/22: 54.7%). Almost every second person (44.6%) is even in the red with more than 2,000 euros (05/22: 35.8%). “The overdraft costs an average of around 11 percent interest. It is therefore advisable to settle the account quickly or to transfer the debt to a significantly cheaper installment loan, because the already expensive overdraft becomes more expensive than cheaper with every increase in the key interest rate,” says Alexander Artopé, CEO of the credit comparison portal smava.de. (4)
data sources
(1) In May 2023, smava anonymously asked the banks represented in the credit comparison of smava.de how they expected the effective annual interest rate for consumer loans to develop on the market as a whole (national average) and on average at their bank in the next 3 months. 13 banks submitted an assessment. To the bank overview
(2) Deutsche Bundesbank: MFI interest rate statistics; Interest rates and volumes for the new business of German banks / consumer loans to private households (last accessed on: June 5th, 2023)
(3) The data used comes from a survey for which the market and opinion research company Civey interviewed more than 2,500 people on behalf of smava GmbH (survey period: 05/01 – 05/31/2022 & 05/01 – 05/31/2023). The results are representative for German citizens aged 18 and over, taking into account the statistical error of 3.3-3.5%.
(4) Stiftung Warentest: (last retrieved on 09.06.2023)
2023-06-15 07:40:14
#ECB #interest #rate #decision #bank #raise #lending #rates
