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Interest rates on deposits are falling – April 2023

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The interest rate on bank deposits is falling, which fits into the “optimization” that banks have been using for months. Some institutions have decided to cut interest rates or tighten additional conditions for using promotional deposits. Interest rates on deposits are falling for the fourth month in a row, the analysis reads.

As stated in the analysis, the average interest rate on the best bank deposits in April 2023 was 6.84 percent. It added that in a month this result deteriorated by 0.15 percent, because in March the average interest rate on these products was almost 7 percent.

“From September 2021 to December 2022, this trend was rather the opposite. During this time, the average interest rate on the best savings products increased steadily from 1% to 7.5%. ” HREIT reported.

Analysts stressed that the “deposit fight” contributed to “worsening other important elements – such as the duration of promotional deposit conditions or lowering the maximum amount that can be invested.”

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Lower interest rates on deposits

“These activities were the first phase of optimization aimed at reducing the interest costs of capital, which we were increasingly willing to deposit in banks. Since the beginning of this year, we have seen that banks have not stopped at such optimization and have also slowly started to lower interest rates on deposits” – we read in the analysis.

It was noted that “this is not good news for savers”, who “have been observing for many years that banks add interest to money entrusted to them much slower than inflation eats up the purchasing power of capital.

“It was particularly hard for people whose deposits had expired in recent months. It was not uncommon for holders of annual deposits, after taking into account tax and inflation, realized real losses of more than 10 percent. However, there is a chance that the situation will start to improve – provided, of course, that inflation actually drops significantly faster than deposit rates.

Analysts reported that NBP data show that “in February 2023, the average interest rate on deposits actually placed fell to 5.81 percent”, although “a month earlier it was 0.23 percentage points more”.

Average interest rate on depositsHREIT

MPC does not raise interest rates, interest rates are falling

“What is happening on the deposit market is closely related to the actions of the Monetary Policy Council. In April 2023, it left interest rates unchanged. Thus, it was the 7th month in a row in which the MPC did not change the cost of money in Poland” – it was emphasized in the analysis.

It was added that the lack of increases “is interpreted by the market as the end of monetary policy tightening in Poland”, which “is important because there is a very close relationship between the level of interest rates and interest rates on deposits”.

“As a result, banks were forced to make adjustments to interest rates that had previously increased in the hope of interest rate increaseswhich ultimately did not occur. Moreover, today there is speculation about when the MPC will start cutting interest rates. Such an atmosphere is conducive to adjustments in interest rates on deposits, because each month we are approaching the moment when rates will be cut. This is to take place this year – suggest quotations of futures contracts on the interest rate (FRA)” – analysts explain.

In their opinion, in April “some banks lowered interest rates on particularly attractive deposits (4 institutions decided to do so)” and “one of the banks even withdrew its offer of a deposit with an interest rate of 5 percent”.

“Other common practices in terms of optimizing the offer also include shortening the promotion period, reducing the amounts that can be invested or introducing additional conditions after which the promotion can only be met, i.e. active use of the card or BLIK” – the analysis explains.

It was added that “on the other hand, we also have a new product from one of the banks, which tempts with an interest rate of 8.1 percent.” and “this product is at the forefront of deposits available today.” However, it was noted that “the problem is that the offer lasts until the end of May 2023 and is intended for a maximum of 1.5 thousand first customers.”

“Let us remind you that as part of our ranking, we collect information every month about the best interest-bearing deposits and savings accounts. We focus on those where we entrust money for a maximum of 12 months. Safety is key for us, so the deposit or savings account must be subject to under the guarantee of the BFG (or an identical institution from another EU country). And although we accept offers that require the use of additional products (accounts, cards, and even insurance), we do it only when you can opt out of them or avoid costs actively using the card or account.

Main photo source: Shutterstock

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