Eurozone average household deposit rate falls below 0.5% - ING

Teunis Brosens, Senior Economist at ING, notes that the Eurozone’s bank lending and saving rates continue their falls as the ECB continues its easing policies

Key Quotes

“The first reading of bank interest rates after the Brexit referendum, for July, shows that bank rates continue to set new record lows each month – and will probably continue to do so for a while. The Eurozone average household new mortgage rate fell 0.05%, reaching 1.92%. Finns have the best deal, securing their mortgage at an average rate of 1.15%, while the Irish still pay 3.24%. To be fair, differences in e.g. rate fixation periods, LTVs and other country-specific characteristics mean that a comparison is difficult to make.

The slide in household deposit rates continued as well, with the Eurozone average remuneration rate falling to 0.49%. Differences remain stark though: banks in France still offer a 1.02% average rate, while in neighbouring Belgium, retail deposits get just 0.12% on their deposits (just above the imposed minimum of 0.11%).

Lending Rates for SMEs (measured as loans running for over a year with a principal up to €250k) have now fallen 2bp below the 2.50% barrier.

With the ECB determined to carry on with its cocktail of easing policies, consisting of quantitative easing (QE), targeted refinancing operations (TLTRO) and a negative deposit rate, rates look set to fall further. This increasingly puts pressure on Eurozone banks. Lending rates are currently falling faster than deposit rates. Moreover, retail deposit rates are reaching the zero lower bound, which banks are reluctant to cross. The retail interest margin fell to 142bp in July, down 11bp compared to a year ago.”