Levs Import Surge: Households Respond to Bank Actions
In a surprising turn of events for savers, many banks have recently announced the removal of certain fees. Though, this positive news is being overshadowed by a less welcome trend: financial institutions are together lowering interest rates on savings accounts. This shift is leaving many wondering what’s happening with their hard-earned money and what the future holds for their savings.
The Declining Yield: What the Numbers Say
The data paints a clear picture of this downward trend. According to BNB data, the average return on deposits in June fell to 0.87%. This marks a noticeable decrease from May’s average of 0.91% and April’s 0.97%.It’s a stark reminder that the days of considerably higher returns on simple savings accounts might potentially be behind us, at least for now.
Who’s Offering What? The Small vs. The Big Banks
It appears that smaller banks are still the ones primarily offering any meaningful interest on deposits. The larger financial institutions, on the other hand, seem content to keep their customers’ savings with what amounts to zero profitability. This divergence in strategy could be a key factor for savers to consider when choosing where to keep their money.
A look Back: The Rise and Fall of Higher Rates
For the past couple of years, some financial institutions had been actively trying to attract new customers by gradually increasing interest rates on deposits.We saw offers for 12-month deposits reaching as high as 1.5-2% per year, and for longer terms, rates could even climb to 3-4%.However, in recent months, these same banks have begun to dial back the profitability they offer, signaling a change in their approach.
Euro Deposits: A Similar Story, But With a Twist
The trend of declining interest rates isn’t limited to domestic currency deposits. We’re also seeing a reduction in interest rates on Euro deposits. In June, the average interest rate for newly opened Euro deposits stood at 1.02%, down from 1.13% the previous month and a more significant drop from 1.66% a year ago.
Interestingly, despite the lower rates, savings in Euros have actually seen an increase in the last month. Newly opened Euro deposits in June amounted to BGN 290 million, representing a 10% increase from the previous month and a 17% rise on an annual basis. This suggests that even with lower yields, the Euro remains an attractive option for some savers.
what’s Driving This trend? Looking ahead
the prevailing tendency of decreasing interest rates on deposits is likely to continue in the coming months and even over the next year or two. The primary reason behind this shift is the anticipated influx of liquidity for banks once the euro is introduced.
When the euro is adopted, banks will benefit from the release of mandatory minimum reserves currently held by the BNB. This release is expected to inject over BGN 15 billion into the banking system.While this might seem like good news for banks, it’s not ideal for individuals with savings. Though,this increased liquidity is also a key reason why banks are unlikely to raise interest rates on loans,such as residential and consumer loans,for a considerable period.
for savers,this means a continued period of lower returns. It’s a good time to re-evaluate your savings strategy and explore other avenues for growth if your financial goals require higher yields.