Comparison portal: Fixed-term deposit interest rates fall again for the first time

Economic Scenario - Fixed-Term Deposit Rates and Mortgage Loans: A Shift in Trends

For the first time in quite some time, fixed-term deposit rates have slipped, marking a notable decline. According to data sourced from comparison site Verivox, the average rate for two-year fixed-term deposits has dipped to 3.35%, from its previous stand at 3.39%. The adjustment might not be substantial, but it marks a change in the lengthy period of escalating interest rates. Meanwhile, property buyers and builders have some relief in store, as data from Check24 indicates that building loans have become less costly.

The European Central Bank (ECB) has actively countered the escalating inflation in the Eurozone's single currency area with 10 consecutive interest rate hikes, beginning in July 2022. This strategy has undeniably favored savers; however, it has increased the financial burden on builders. Most lately, the ECB has chosen to pause its interest rates. The bank is slated to announce its forthcoming monetary policy decision today.

In this interim, inflation has witnessed a more pronounced decline than several analysts had anticipated. The lower inflation trend could potentially entice the bank to issue lower interest rates earlier than initially anticipated. As per Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH, banks are considering this probability while setting their deposit conditions.

Fierce competition

As per Verivox data, up until December 11, depositors had been receiving a median interest rate of 3.35% on two-year fixed-term deposits worth €10,000 from national banks. This figure had been €3.39% at the start of November. The interest rates for deposits kept for five years continue to average at 3.15%, compared to the previous €3.21%.

According to Verivox, the interest rates at regional savings banks and cooperative banks have fallen at a significantly faster and more drastic pace than at national banks, which offer their savings products nationwide and thus encounter stiffer competition. "Rates on local savings banks and cooperative banks are descending at a rapid pace, much quicker than at banks that offer their savings products on a broad scale," described Maier.

A curb in interest rates for calling money

Though Verivox has yet to observe a decline in the average interest rates for calling money, the increase has largely plateaued lately. For banks offering nationwide services, the interest rate has merely increased by 0.06 percentage points to an average of 1.71% since early November. On average, savers at savings banks (0.59%) and regional cooperative banks (0.58%) receive significantly lower returns.

Lower interest rates for property loans

On the bright side, property buyers are experiencing a decrease in interest rates. "Banks are already factoring in the possible interest rate reductions to be implemented by the central bank in the upcoming year," stated Ingo Foitzik, Managing Director of Construction Financing at Check24. Interest rates on ten-year German government bonds, which serve as a benchmark for property loans, have consequently fallen as well.

According to data from Check24, the average interest rate for a €400,000 building loan is currently determined at a yearly 3.34%, as of December 13. The interest expenses thus amount to €114,085 until the conclusion of the ten-year fixed borrowing period with a consistent monthly rate. This is a significant reduction compared to the average interest rate of 4.02% in October, representing a savings of €28,771 in interest costs.

Changes to interest rates impact developers seeking new or follow-up financing for property loans. Current mortgage loans, however, remain unaffected. Information on interest rates can be obtained from the consumer portal Biallo.de.

Related Articles:

• Concerning EU funding for green Saar steel
• The €3 billion Saar Fund is deemed unconstitutional
• Politicians at a loss post shocking news
• Criticism from the Court of Auditors regarding the state government's debt plan
• Oliver Maier, the Managing Director of Verivox Finanzvergleich GmbH, indicates that low inflation could prompt the central bank to lower its key interest rates earlier than initially anticipated, affecting fixed-term deposit account interest rates.
• With two-year fixed-term deposits, depositors in Germany are currently receiving an average interest rate of 3.35% from banks, as per data from Verivox.
• Consumers looking for fixed-term deposits can make well-informed decisions by exploring comparable interest rates supplied by various banks through the comparison portal Check24.
• Regional savings banks and cooperative banks in Germany have lower median interest rates on fixed-term deposits than nationally active banks, highlighted by Verivox data, which identifies that such banks are confronted by more intense competition.
• The European Central Bank (ECB) has implemented ten successive interest rate hikes since July 2022 to combat high inflation in the Eurozone's single currency area. Nonetheless, recent data reveals that inflation has declined more starkly than some experts believed, potentially setting the stage for interest rate reductions earlier than anticipated.
• Erik Nielsen, Group Chief Economist at UniCredit, emphasized that the ECB's monetary policy has effectively reduced inflation, giving rise to a slower pace of price increases in Germany. However, this policy has also led to financial uncertainty due to the high level of interest rates.
• Frankfurt, Germany, plays a significant role as a hub for economic activity, home to several major banks like Deutsche Bank and Commerzbank, making it an essential location for monitoring interest rates and the overall economic situation.

Sources:

Enrichment Data:

The current stance on fixed-term deposit interest rates and building loan interest rates in Europe is influenced by recent developments from the European Central Bank (ECB) and inflation trends. Below are the key aspects to consider:

Fixed-Term Deposit Rates

1. Rate Cuts: The ECB has lowered its key interest rates, including the deposit facility rate, by 25 basis points to 2.75%, as of February 5, 2025. This move reflects the ECB's revised assessment of the inflation outlook and the requirement to ease monetary policy to support economic growth.[1][3][4]
2. Future Cuts: Markets anticipate additional rate cuts, estimating a total reduction of 75 basis points by the end of 2025, which could possibly bring the deposit rate down to 2%.[1]
3. Data-Dependent Approach: The ECB will follow a data-dependent approach, making interest rate decisions based on incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.[3][4]

Building Loan Interest Rates

1. Interest Rate Trends: The interest rate on new mortgage loans for households in the Eurozone has reached its lowest level since spring 2023, standing at 3.72% in November 2024. This trend indicates a decrease in borrowing costs for households.[2]
2. Affordability and Demand: The reduction in house prices and increased real wages have improved the affordability of purchasing a home, leading to higher demand for housing loans. New lending to households for house purchases was up by 4% year-over-year in 2024, though still below 2022 and 2021 levels.[2]
3. Economic Impact: The ECB's recent interest rate cuts are gradually making new borrowing less expensive for firms and households. However, financing conditions remain tight due to the lingering effects of past interest rate hikes and the restrictive monetary policy stance.[3][4]

In summary, the ECB's actions aim to stabilize inflation at 2% and support economic growth by easing borrowing costs. Fixed-term deposit interest rates are anticipated to drop further, while building loan interest rates have already experienced a reduction, improving the affordability of housing loans and increasing demand.