While the eyes are turned to the decisions of the European Central Bank next week, banks in Greece are preparing simultaneously with the increase in interest rates on loans, to announce adjustments to deposit interest rates as well. This will mark the end of the era of zero interest rates for deposits which after several years will begin to yield… something.
The information states that especially for term accounts – and if the estimate that the ECB will increase the intervention rate by 0.75% this time is confirmed – interest rates can reach 0.6-0.7%.
After the first interest rate increase by the ECB by 0.5%, the banks did not proceed with a substantial increase in deposit rates. This time, however, the increase is considered almost certain. Depositors are experiencing the biggest loss of capital in several decades as never before has there been such a difference between the deposit rate and inflation. At the end of 2022, depositors risk losing 9-10% of their capital as what the deposits could buy at the beginning of 2022 with 100 euros, at the end of 2022 will cost 109-110 euros based on estimates for this year’s average inflation.
The increase in the interest rate on deposits is considered necessary for one more reason: the yields of interest-bearing Greek government bills and bonds have already increased, while with such inflation it is logical for depositors to look for ways to “protect” their capital.
In loans on the other hand, the 0.75% interest rate increase will bring large charges for hundreds of thousands of depositors who have variable rate mortgages. If the loan of 100,000 euros bears interest at the ECB interest rate + 1.5%, then the borrower paid an installment of 626 euros by July for a remaining repayment period of 15 years. With the first increase of 0.5% in July, the installment has already risen to 649 euros (+22.89 euros), while if there is a new increase of 0.75%, then the installment will rise to 684.35 euros with the monthly charge now exceeds 58 euros.
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