As of: February 9, 2024, 7:19 a.m
By: Fabian Hartmann
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Interest rates will fall – but nobody knows when the ECB will act.
How can investors prepare for interest rate cuts?
Frankfurt – Christine Lagarde, President of the European Central Bank (ECB), has a significant influence on the direction interest rate policy in the euro area takes.
Every six weeks, investors who want to save listen very carefully, because at this interval Lagarde usually announces what is next for European interest rate policy.
Lagarde last addressed the public at the end of January.
It quickly became clear: the ECB did not think the time had yet come to cut interest rates.
According to experts, this probably won't take too long,
Wirtschaftswoche
reported on Tuesday (February 6th).
Because some banks have already reacted and lowered their interest rates again compared to 2023.
In the previous year, some financial institutions had repeatedly outbid each other with better conditions for daily and fixed-term deposits.
On the other hand, anyone who currently opts for a fixed-term deposit offer with a term of two years will receive an average of three percent interest per year.
Banks are backtracking on interest rates – DKB lowers fixed-term deposit interest rates four weeks after increasing them
The last sensational interest rate offer was presented to investors at the beginning of January (January 3, 2024).
The Berlin-based Deutsche Kreditbank (DKB) gave 3.5 percent for a one-year fixed-term deposit.
After four weeks, however, the special offer was over again - since February 1st, the DKB has only offered three percent interest on a fixed-term deposit of the same duration.
Numerous other banks are currently acting in a similar way.
There were 497 adjustments to fixed-term deposit interest rates in January
at the banks currently listed on the comparison portal
tagesgeldvergleich.net .
“Of these, 423 were interest rate cuts and only 74 were increases,” said operator Daniel Franke to the
Handelsblatt
.
Financial institutions that have reduced their interest rates include ING, Creditplus Bank and Süd-West-Kreditbank.
Interest rate investments could indicate an imminent interest rate cut by the ECB
According to experts, one of the main reasons for this development is the tendency of institutions to assume that the European Central Bank (ECB) has previously lowered interest rates.
And they were often stronger than usual.
As a result, the financial institutions themselves would receive less interest if they invest their customers' deposits with the central bank.
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According to Wirtschaftswoche,
other interest investments could also
anticipate an imminent U-turn by the ECB.
The yields on ten-year German government bonds have also recently fallen again.
But how should investors react in view of a potential imminent interest rate cut by the central bank?
Is it worth securing the current conditions or should we hope for an improvement in market interest rates?
According to the Handelsblatt
, the best time to secure comparatively high interest rates has
already passed.
Good interest rate offers have recently become impossible to maintain for a longer period of time anyway, as interest rates fall the longer their term is.
That still applies.
For 12-month fixed-term deposits you get a top rate of around four percent, for fixed-term deposits with a term of three years it's at best around 3.5 percent, but tends to be less.
What can investors do now in light of the interest rate cuts?
In view of falling interest rates, other experts also advise interested savers not to wait long before taking out a fixed-term deposit.
“At the last council meeting, the ECB already indicated a first interest rate cut for June at the latest,” Handelsblatt quotes
Kevin
Schwarzinger from the financial portal
biallo.de.
Schwarzinger recommends savers to set a specific amount over a longer period of five or ten years.
This way you could secure comparatively high interest rates for longer.
There are still a whole range of offers available to investors for this purpose.
Despite the interest rate cut announced on Monday, for example at Creditplus Bank.
The interest there for a one-year fixed-term deposit is 3.65 percent.
In the current
stock exchange online
fixed-term deposit comparison, Creditplus Bank comes in third place.
Creditplus Bank |
3.65% (12 months), 3.6% (24 months), 3.4% (36 months) |
J&T direct bank |
3.9% (12 months), 3.85% (24 months), 3.2% (36 months) |
CA Consumer Finance |
3.9% (12 months), 3.8% (24 months), 3.4% (36 months) |
The Czech J&T Direktbank comes in second place.
There, customers receive 3.90 percent interest on a twelve-month fixed-term deposit.
The winner in the fixed-term deposit comparison on the Börse Online
portal
is the French CA Consumer Finance.
The interest for a one-year fixed deposit is also 3.9 percent.
However, it offers better interest rates for longer-term investments.
There is 3.8 percent interest for a two-year term and 3.4 percent for 36 months.
Although the interest rate at J&T Direktbank is 3.85 percent for 24 months, customers here with a 36-month term only receive 3.2 percent.
Significantly higher interest rates can be found on the international market
If you want to invest your money for the long term, you can expect significantly lower interest rates.
In expert circles, this constellation is also referred to as an inverted yield curve.
It is a clear sign that banks must expect lower interest rates in the future.
It also shows that banks from abroad are often a little more generous.
German banks are only ahead when it comes to fixed-term deposits with a ten-year term.
Deutsche Kreditbank AG, Taubenstraße Berlin (April 13, 2022) © IMAGO/Sascha Steinach
According to the Handelsblatt
, some significantly higher interest rate offers can also be found
on the international market .
For example in Cyprus: The provider Freedom 24 currently offers its customers 5.82 percent interest on a one-year fixed-term deposit.
Or in Estonia, where the big bank based there offers investors at least 4.0 percent interest.
What are the daily deposit and fixed-term deposit forecasts for 2024?
Experts expect the ECB to cut interest rates later this year, possibly in June.
There are plenty of reasons for this in addition to the recent fall in inflation.
The current high interest rates are putting a strain on German companies, which in turn has contributed to their recent comparatively poor mood.
“Everything stands or falls with the ECB,” said financial advisor Ania Scholz-Orfanidis from FMH-Finanzberatung to
Handelsblatt
.
According to Scholz-Orfanidis, the extent to which those responsible at the banks are waiting for the central bank's next interest rate move is particularly clear when it comes to overnight interest rates.
“The closer a possible interest rate change comes, the shorter the interest rate guarantees become,” she explains.
While six months of interest guarantee was standard in October, now only three months or no guarantee at all is common practice.
However, the FMH expert cannot predict exactly when the ECB will finally lower the key interest rate.
“The longer inflation stays reasonably low, the more likely a rate cut will be,” she says, emphasizing that she would be surprised if the ECB cuts the key interest rate in one of the first meetings of the year.
Recently, ECB board member Isabel Schnabel also spoke out against an increase in the key interest rate.
(Fabian Hartmann)