The era of negative interest rates is coming to an end. There is an increasing number of banks seeking to completely or partially eliminate so-called custody fees for private customers. Is it worth saving now?

Fewer and fewer banks are charging negative interest. Even before the expected first major interest rate hike in the euro area in eleven years, at least 49 financial institutions had completely or partially eliminated so-called custody fees for private clients. This came out of an evaluation of VeriVox, a comparison portal of nearly 1,300 banks and savings banks.

However, many banks are still waiting. As per the data, at least 426 credit institutions are still charging negative interest in excess of a certain amount on call money or current account (as on July 14). “As soon as the central bank removes the penal interest rate on bank deposits, negative interest rates for savers will also disappear across the board,” expects Oliver Meier, managing director of Verivox Finnazverglech GmbH. “A historic interest rate event is coming to an end”.

ECB tightens monetary policy

Background: The European Central Bank (ECB) is expected to tighten monetary policy next Thursday (21 July). Given record inflation, the ECB wants to raise key interest rates in the euro area by 0.25 percentage points. In September, the central bank brushed off the possibility of another, possibly larger rate hike. Banks will still have to pay 0.5 per cent interest on depositing funds in ECB. Many financial institutions pass on costs to customers.

Several large institutions, including Deutsche Bank, have already announced that they will reduce negative interest rates for their customers in line with the decisions of the ECB. According to Verivox, many banks and savings banks automatically reduce negative interest rates in the event of interest rate adjustments anyway, as they have explicitly linked the custodial fee to the ECB deposit rate.

result in detail

As per the assessment, 34 financial institutions have already completely phased out their negative interest rates since the end of April. In another 15 institutions, allowances were increased significantly so that at least most customers do not have to pay negative interest. Another institution has decided to do away with it completely, and the negative interest will no longer apply on August 1.

In addition to online banks, financial institutions that have initiated the turnaround include several regional institutions, including several Sparda and PSD banks as well as Volksbank and savings banks.

Is it worth saving again?

Negative interest rates are good news for end bank customers in the near future. Due to the change in the ECB interest rate, savers can expect an increase in interest rates for fixed deposits and the like. “If interest rates rise in the future, business with savings deposits will become attractive again for banks. First institutions are already setting themselves up for this,” Maier explained.

However, with high inflation now munching on savings, it eats away at interest income. Because the so-called real interest rate – that is, what is left of the interest rate taking into account the inflation rate – is clearly in the negative range. To generate real returns, the interest rate must be higher than the inflation rate, otherwise the value of the money invested will continue to decline.

For the whole of 2022, Deutsche Bundesbank expects an inflation rate of 7.1 percent in Europe’s largest economy. The EU Commission now forecasts inflation in the euro area at 7.6 percent, according to its forecast for the current year updated yesterday And also in Germany 7.9 percent.