In anticipation of a decline in the European interbank interest rate Euribor, Estonian banks have also started to lower interest rates on fixed-term deposits. Interestingly, Swedbank offers a better interest rate for a shorter deposit than for a longer one.
In the autumn of last year, banks operating in Estonia increased interest rates on deposits offered here to levels not seen for a long time. Several banks offered a risk-free 5% return for a one-year deposit. The situation has now changed.
Several banks, for example, have lowered the interest rate offered for one year and it is no longer possible to obtain more than 4.5%. SEB estimates, for example, that interest rates will not rise again.
“Interest rates on term deposits have probably peaked and will continue to fall until they stabilize,” Ainar Leppänen, SEB’s head of retail banking, told ERR.
12-month deposits in Estonian banks in October 2023 compared to January 2024:
LHV estimates that, in addition to market expectations, they also evaluate deposits based on their own liquidity needs.
“The level of liquidity of LHV is high, so money markets expect a significant decline in interest rates this year. According to forecasts, the six-month Euribor could reach the end of June about at the 3% level, which is why we have adjusted the interest on long-term deposits relative to the market,” said Juhan Peet, head of treasury LHV.
“Depositors should take into account that interest rates are unlikely to rise in the foreseeable future, so it is worth choosing between longer savings periods when growing their savings to make the most of today’s environment,” Peet added .
At the same time, banks started offering higher interest rates for shorter periods. In some cases, the 12-month interest rate is the same as the six-month interest rate. At the same time, for example, Swedbank offers even higher interest for shorter periods than for longer ones.
Interest rates on term deposits offered by Estonian banks:
“The higher interest rate for shorter periods reflects the market’s expectation that interest rates will begin to fall in the near future. Therefore, today we offer a higher interest rate for shorter deposit periods than for longer periods This means that it is a good opportunity to deposit free money for those who cannot or do not want to deposit it for a longer period,” said Tarmo Ulla, head of personal banking at Swedbank.
Swedbank also announced that due to the high interest rates paid in Estonia, people’s interest in keeping money in time deposits has increased significantly.
“For example, in 2022 a total of 19,600 time deposits of private clients were concluded at Swedbank, then in 2023 almost 146,000 times. The volume of deposits also increased by leaps and bounds: While in 2022 private clients made a total time deposits at Swedbank of 919 million euros of deposits, in 2023 they deposited time deposits at Swedbank totaling almost 3.1 billion euros,” Ulla said.
The European Central Bank (ECB) has started raising interest rates in 2022 to counter rising prices. The last time the ECB raised interest rates was on 20 September last year.
According to Eurostat’s flash estimate, Eurozone inflation was 2.9% in December, which is 0.5 percentage points higher than in November. The inflation desired by the ECB is 2%.
Euribor has fallen slightly from its recent peak and was at 3.891% on January 9th.
2024-01-11 04:18:00
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