Rates go up, but deposits don’t stay returned. ‘Banks are experiencing delays’

 Rates go up, but deposits don't stay returned.  'Banks are experiencing delays'

THEInterest rates are rising and European Central Bank (ECB) President Christine Lagarde has already warned that this trend should continue in the coming months. While this increase is already reflected in the monthly mortgage repayments, the truth is that Portuguese deposits remain unprofitable, but the prospect is that these interest rates will also rise.

“Deposit rates depend on the commercial policy of the bank, they are a decision of the bank, unlike the terms of mortgages which are normally indexed to Euribor. Moreover, interest on deposits represents a cost for the bank, while interest on installments And for several years now, banks had a decline in income related to interest on loans as a result of a negative Euribor. banks postpone interest rate hikes on deposits and do not take interest rate hikes into account in their pricing“, António Ribeiro, specialist in financial affairs at DECO Proteste, explained to the News per minute.

However, according to António Ribeiro, this is not a novelty: “Usually, when key rates fall, banks immediately replicate these falls; but when key rates rise, banks are much slower to reflect the rise and never at the same pace“.

In the coming months we will slowly see the deposit rate ‘freed up’

The ECB president announced the rate hike at the next Governing Council meeting late last month, the next on October 27, in a bid to fight inflation. If the ECB does not choose this path, the consequences for the economy will be more serious than the rise in the cost of credit, according to Lagarde.

And the deposits? Are you following this rise?

The DECO Proteste financial specialist believes that “some banks are slowly changing their prices”, and that “for now few banks have raised interest rates, but some have already done so with increases well below the key rate“.

“Since July, the European Central Bank has already raised its key rate by 1.25%, but banks are far from reflecting these price increases. One of them increased the fee of some deposits by 0.5% and the other by 1%, but in general these are increases in promotional accounts for new customers or new amounts. Thus, in the coming months, we will slowly witness the ‘freezing’ of the deposit rate,” concludes António Ribeiro.

The basic rate is already 2.106% gross, ie they yield 1.5% net, more than term deposits

“It’s important to diversify.” So where to invest the money?

For more cautious investors, who do not want to take risks and prefer products with guaranteed capital, “savings certificates” are the product that has benefited from the increase in Euribor“, António Ribeiro explained to News per minute.

you Savings Certificatesshould be noted, are “debt instruments created for the purpose of saving households” and “their main feature is that they are retail distributed, that is, they are placed directly with savers and the minimum subscription amounts are lower,” explains the Treasury and Public Debt (IGCP) ) out, on his website.

“The base rate of Savings Certificates is calculated each month according to the 3-month Euribor values ​​of the previous month, i.e. the increase in Euribor rates is immediately reflected in the base rate of the Certificates. After a long period in which the base rate on depositary receipts was net 0.3%, it has taken a very significant upward path in recent months: in October, the base rate is already 2.106% gross, that is, they yield 1.5% net, more than term deposits“, adds the expert from DECO Proteste.

However, this increase is limited, continues António Ribeiro, as the “calculation formula establishes a ceiling of 3.5% gross at the base rate”, meaning that “if the three-month Euribor continues to rise at the same rate, this ceiling will probably be reached next yearso the effective net income, for those who invest in Savings Certificates for a period of up to 10 years, should not differ much from 2.8% net per year according to our simulations”.

Still, “it is best that we find in products with guaranteed capital and that is why we recommended the subscription,” says the DECO specialist.

Anyone who has some money to invest, especially large amounts, and doesn’t need that money in the short and medium term, should also consider investing in funds, more in a long-term perspective.

António Ribeiro emphasizes that: “It’s important to diversify” and “who has some money to invest, especially large sums, and does not need that money in the short and medium term, should also consider investing in funds, more in a long-term perspectiveThis is because “with the income from guaranteed capital products it will not be able to overcome inflation”.

In July, the ECB raised interest rates for the first time since 2011. On that occasion, the benchmark interest rate rose by 0.50 percentage point. In a second phase, in September, there was an increase of 0.75 percentage point, so that the reference interest rate is now 1.25%.

The ECB believes that price stability should be ensured when annual inflation is slightly below 2.0%.

Also read: ECB. Most gave ‘ok’ to the 75 basis point increase in September

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