The experts of the investment bank Goldman Sachs are relatively sure: The European Central Bank (ECB) will increase the key interest rates this Thursday despite the recent turbulence on the financial markets around the American Silicon Valley Bank and now Credit Suisse – by another 0.5 percentage points. "We see broad support in the ECB Governing Council for the need for interest rates to continue to rise," said Jari Stehn, Goldman Sachs' chief European economist. The ECB deposit rate, which currently also plays an important role for savings rates, is thus likely to be raised from 2.5 to 3 percent.
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What do these monetary policy decisions mean for the interest that consumers have to pay on loans in everyday life and receive on savings? Max Herbst of FMH-Finanzberatung, who continuously compares consumer interest rates, reported on Tuesday that interest rates on construction loans with ten-year fixed interest rates had now exceeded the average mark of 4 percent.
However, this was apparently not a consequence of the turbulence: rather, the ten-year federal bond, on which construction interest rates are indirectly oriented, had already risen in the course of February. This was due to a reassessment of inflation risks and thus interest rate expectations on the financial markets: inflation proved to be more persistent than many had thought, and the February inflation figures had brought surprises up in many currency areas.
"In the face of constant surprises, both in terms of economic resilience and the rise in core inflation, markets have capitulated," said Franck Dixmier, fixed income expert at Allianz Global Investors. With a little delay, this also caused interest rates to rise. The recent turbulence, on the other hand, led to high demand for government bonds and depressed yields – until the calming of the markets recently caused them to rise a little, to 2.4 percent.
Interest rates on savings are also likely to continue to rise with ECB interest rates, albeit by no means proportionally. For call money you now get an average of 0.88 percent, at the beginning of last year it had been only 0.02 percent.
The best providers are more than 2 percent, but usually only for new customers, guaranteed for a few months. Akbank, a German institute from Eschborn with a Turkish parent company, pays 1.6 percent on call money for an unlimited period of time and without conditions. The direct bank DKB, which is popular with cost-conscious people, has just raised its overnight interest rates to at least 1 percent for existing and new customers.
There is a little more for fixed-term deposits over a year: On average, the interest rates here are now 1.85 percent – providers from other European countries even offer more than 3 percent.
The savings book becomes an inflation trap
"Every increase by the ECB leads to a certain extent, even if not one-to-one, to an increase in overnight and fixed-term deposit interest rates," Herbst reports from the experience of recent months.
There is a mechanism here: banks with large holdings of savings deposits have no interest in raising interest rates on these holdings. Other institutions, on the other hand, which have so far had rather few customers, have a great interest in attracting new customers through slightly higher interest rates. However, they want to keep the costs associated with this under control; this leads to many temporary offers for new customers.
The banks with large deposit portfolios are now keeping a close eye on how many customers they are losing due to the more aggressive offers of their competitors; and then decide whether to raise their interest rates a little or simply endure certain customer losses. Many savings banks and Volksbanks therefore continue to offer very low savings interest rates. It is particularly striking in savings books – interest rates are on average only 0.16 percent.
It is somewhat different when it comes to lending rates: The interest rates on installment loans often develop similarly to the savings interest plus bank margin, because overnight and fixed-term deposits are used to refinance consumer loans. For installment loans on 48 months, you now pay an interest rate of 6.62 percent, at 60 months of 6.61 percent a year. At the beginning of last year, both interest rates were still below 4 percent.
Interest rates of 5 percent "realistic forecast"
For construction interest rates, on the other hand, the respective demand for government bonds plays a role – they could therefore even fall in the short term. "Due to the current increased demand for safe German government bonds due to the SVB problem, yields are falling, which consequently leads to falling Pfandbrief yields and ultimately to lower construction interest rates, even if the ECB raises key interest rates," says Herbst.
Only when the security thinking decreases again, the inflation problem comes to the fore – then the interest rates are likely to rise all the more, says Herbst: "Five percent for ten-year construction money is therefore no longer a pessimism, but a realistic forecast – unfortunately."
The credit intermediary Interhyp is somewhat more cautious in its forecast: Board member Mirjam Mohr expects construction interest rates in a corridor between 3 and 4 percent in the current year – and only briefly with interest rates above.