Banks Forced to Lower Interest Rates on Savings Accounts
Savings Rates Set to Dip as Banks Adjust to New Regulations
Interest rates on popular savings accounts are poised to decrease in teh new year as banks adjust to new regulations capping loyalty bonuses.
While the European central Bank’s (ECB) refinancing rate currently sits at 3.40%, a new rule limits loyalty bonuses offered by banks to 50% of this rate. This means the maximum bonus will be capped at 1.70% starting January 1st.
Although most banks already operate within this limit, Guide-Epargne reports that eight accounts currently offer higher bonuses.These include offerings from Argenta, KBC, vdk, ING, Belfius, and CBC, primarily focused on savings accounts wiht a maximum monthly deposit of 500 euros.These institutions will likely need to adjust their rates downwards to comply with the new regulations.
Outside of these accounts, Santander currently offers the most competitive rate with a base rate of 1% and a loyalty bonus of 1.60%. Me Direct boasts the highest base rate at 2%, but limits its loyalty bonus to 0.50%.
For those seeking longer-term savings options, Izola bank currently offers the most attractive rate on one-year term deposits at 2.90%. Tho, after accounting for the 30% withholding tax on interest income, the net return drops to 2.03%. It’s significant to note that savings accounts benefit from an exemption on withholding tax for the first 1,020 euros of interest earned.
Savings Rates Set to Dip in New Year
The New Year could bring a decline in savings account interest rates as banks adjust to new regulations limiting loyalty bonuses. While the European Central Bank’s (ECB) refinancing rate remains at 3.40%, a new rule caps these bonuses at 50% of that rate, effectively setting a maximum of 1.70% starting January 1st.
Although most banks already adhere to this limit, Guide-Epargne identifies eight accounts currently offering higher bonuses. These include offerings from Argenta, KBC, vdk, ING, Belfius, and CBC, primarily for savings accounts with a maximum monthly deposit of €500. These institutions will likely need to lower their rates to comply with the new regulations.
Outside these specific accounts, Santander currently offers the most competitive rate with a base rate of 1% and a loyalty bonus of 1.60%. Me Direct boasts the highest base rate at 2%, but caps its loyalty bonus at 0.50%.
For those considering long-term savings, Izola Bank currently offers the most attractive rate on one-year term deposits at 2.90%. However, factoring in the 30% withholding tax on interest income, the net return drops to 2.03%. It is crucial to note that savings accounts benefit from an exemption on withholding tax for the first €1,020 of interest earned.