In a notable turn of events, interest rates on fixed-term deposits have experienced a decline for the first time in approximately a year and a half. Despite this, data from the comparison portal Verivox reveals that the rates remain relatively high. Simultaneously, there is relief for property buyers and house builders, as building loans have become more affordable, according to the Check24 portal.

The European Central Bank (ECB) has been grappling with high inflation in the eurozone since July 2022, implementing ten consecutive interest rate increases. While savers reaped benefits, the cost of borrowing increased for builders. The recent pause in interest rate adjustments precedes the ECB's upcoming monetary policy decision scheduled for this Thursday.

In a surprising development, inflation has decreased more significantly than anticipated by many experts. Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH, suggests that this may prompt the central bank to consider earlier key interest rate cuts. Banks are adjusting their fixed-term deposit conditions accordingly.

As of December 11th, Verivox data indicates that savers now receive an average of 3.35 percent interest for a 10,000 euros deposit with a two-year term at nationally active banks, down from 3.39 percent in early November. Similarly, five-year fixed-term deposits yield an average interest rate of 3.15 percent, compared to the previous 3.21 percent.

Maier notes that regionally active savings banks and cooperative banks offer lower average interest rates than their nationally active counterparts. The competition among nationwide banks is intensifying, contributing to the observed declines in interest rates.

Surprisingly, Verivox has not observed a decline in average interest rates for overnight money. While the increase has nearly halted, nationally active banks offer an average interest rate of 1.71 percent, reflecting a minimal increase of 0.06 percentage points since the beginning of November. In contrast, savers receive significantly less on average at savings banks (0.59 percent) and regional cooperative banks (0.58 percent).

Conversely, property buyers are witnessing a positive trend, benefitting from falling interest rates. Ingo Foitzik, Managing Director of Construction Financing at Check24, suggests that banks are already factoring in potential central bank interest rate cuts for the coming year. Data from Check24 reveals that the average interest rate for a 400,000 euros construction loan is currently 3.34 percent annually, resulting in savings of 28,771 euros in interest costs compared to the average rate of 4.02 percent in October.

These changes in interest rates have implications for builders seeking new loans or follow-up financing for real estate loans. Current mortgage loans are typically unaffected. Additional information about interest rates is available on the consumer portal Biallo.de.

Image by Gerd Altmann