Even with a short commitment period, the effect is significantly higher than with daily balances
The ECB interest rate statistics published by the Oesterreichische Nationalbank (OeNB) show a sometimes significant increase in interest rates for savings accounts in Austria. On average, newly concluded tied deposits from private households had an interest rate of 2.85% in July 2023, which was 244 basis points above the previous year’s level. Even a short commitment period resulted in significantly higher interest rates compared to non-committed products. The higher key and money market interest rates therefore had a similar impact on new business with tied deposits as on newly granted loans (+283 basis points). On the other hand, interest rates for overnight deposits (July 2023: 0.69%) increased to a much lesser extent.
In the context of the ECB’s key interest rate increases since the middle of last year, the average interest rate on newly tied deposits by private households with domestic banks rose by 244 basis points in the past twelve months and was 2.85% in July 2023. The deposit conditions showed that customers were able to benefit greatly from higher interest rates even with a short-term commitment, and that only slightly higher interest premiums could be earned with longer interest commitments. Household deposits that were newly invested in July 2023 and were tied up for 3 to 6 months had an interest rate of 2.72%; a commitment of over 2 years only brought in a little more than the average of 2.96%. However, the increases in interest rates on overnight deposits were significantly lower. The corresponding interest rate in July 2023 was 0.69%, which corresponds to an increase of 63 basis points compared to the previous year.
Interest rate developments in new business for deposits and loans
Overall, the interest rates for new tied deposits rose to a comparable extent to the average lending interest rates in new business with private households. In July 2023, these totaled 5.03% for all loan purposes, 283 basis points above the previous year’s value. During the same period, the ECB main refinancing rate increased by 350 basis points to 4.0%. The Governing Council of the ECB has now decided on further increases to 4.25% and 4.50% in August 2023 and September 2023, respectively.
Households adjust their investment decisions
If we look at the development of the deposit volume of private households, the influence of higher interest rates on households’ investment decisions was already clearly visible. While daily deposits declined by -7.0% compared to the previous year, tied deposits from private households rose significantly by 18.6% compared to the previous year. Nevertheless, the current volume of overnight deposits from private households, at around EUR 199 billion, was still more than twice as high as that of tied deposits (EUR 96.4 billion). The current strong demand for tied deposits is also evident when looking at the volume of new business. In 2023 up to and including July, a total of around EUR 27.8 billion, more than twice as many deposits were tied up than in the whole of 2022 (EUR 12.5 billion).
“On average, the interest rates for newly concluded tied deposits by private households have risen by 2.44 percentage points in the last 12 months – thus to a comparable extent to the loan interest rates in this period of 2.83 percentage points,” summarizes Deputy Governor Gottfried Haber. “In the current financial market environment with higher interest rates again, it is important to know that current accounts are generally not investment products, but are used for payment transactions. And when it comes to savings deposits, relatively short commitment periods of 3 to 6 months can currently bring significantly better interest rates than savings deposits due on demand.”
2023-09-15 21:31:51
#Rising #interest #rates #savings #accounts #Austria
