Deposit Account Rate Forecasts 2023: Increase or Decrease?

You’ve heard of of the increase in savings account rates? What will happen to deposit accounts in the near future? If you are looking for ideas and forecasts on the trend in deposit account rates in 2023 let’s try to make some reflections together in order to elaborate reasoning for the management of our liquidity.

The current interest rate scenario

The focus on interest rates is always high. This theme has been crossed by multiple crises, starting with the COVID-19 emergency, when it was clear that central banks would continue to inject liquidity while keeping rates low. In fact, this scenario had been inaugurated with the Quantitative Easing by Mario Draghi and his famous “whatever it takes”which also continued with Christine Lagarde.

In these years of crisis, the European Central Bank and the Federal Reserve had acted in such a way as to strongly support the economy so as to favor the economic recovery after the shock of the Coronavirus.

All of this, of course, has an impact on the savings account rates. Simplifying: with so much liquidity around, banks don’t need to “pay” it much in the form of interest to savers because there is too much of it.

We’ve already been coming for years that weren’t very positive on this point: if you’ve opened or thought about opening a deposit account in the last 4-5 years, you know what I’m talking about.

After the Ukrainian-Russian war: what happened

However, the situation has begun to change, as that turning point has arrived which has led to a release. In fact, the deposit account sector has seen several changes over the last few months.

Starting in May, interest rates for market deposit accounts began to rise, while remaining very far from inflation.

In particular, interest rates on short-term bonds (6-12 months) are those that show the most significant growth, while those on longer-term deposits recorded a decline. Furthermore, the number of Deposit Accounts that can be released was reduced and the times for the payment of interest accrued with one’s investment lengthened.

Let’s see the details (data ofCompareAccounts and SOStariffe Observatory):

• Deposito accounts with 6-month blocked sums: you register a average gross rate you seem to +0,62%, a very slight increase compared to the previous year’s data (+0.61%). However, the net gain is down slightly. For a deposit equal to an average of 20,000 euros, with a 6-month bond, a net gain of 30.88 euros is recorded, down 0.28% compared to the previous surveys. Instead, the percentage of 6-month restricted accounts with a release option is reduced: only 50% of 6-month deposits can be released. Lastly, the payment times for the interest accrued on the amount deposited have lengthened, and are only disbursed at the end of the bond, ie 6 months after the investment;
• deposit account with a 12-month commitment: you register a more evident increase in the average gross ratewhich passes 0.76% to 0.81%. This results in an increase of I earn net, +12,38% every year. For a deposit of 20,000 euros, the net gain recognized is 87.51 euros. Deposit accounts with the possibility of release are reduced (from 58% to 50%) and the time required to obtain payment of accrued interest increases to 9.5 months. So these accounts are more advantageous, but also more accessible because they record a -7.14% drop in the minimum deposit amount. For this reason, a larger number of savers can evaluate the possibility of investing in this type of deposit account;
• Deposito accounts with 18-month commitment: they become less convenient as you register a average gross rate of 0.82%, down from the 0.86% recorded the previous year. The reduction in the average rate is also reflected in the net gain which is reduced by 11.59%. For a deposit of 20,000 euros with an 18-month commitment, a profit of 129.58 euros can be obtained. The number of accounts that can be repaid is also decreasing (from 58% to 46% of the total) while the average time required to record the payment of interest is decreasing (from 12 months to 9.5 months). However, they are more accessible thanks to a reduction in the minimum amount required to open a deposit which drops to 5,540 euros, a drop of 9.85%.

November 2022: increase in deposit account rates and inflation

However, things are in constant flux. Thanks to the continuous geopolitical events and inflation, the news changes quickly.

I deposit accounts, in fact, have it again more competitive ratesi, even the gross value of some is close to 4% (illimity deposit account among these). Although this is not a particularly high yield, these are higher numbers than those we have seen in recent years and which, in any case, given the current inflationary situation, can be a good alternative to the current account.

Deposit accounts: forecasts for 2023

In mid-December last year, a 50 basis point hike in key interest rates was announced: for this, the ECB raised the deposit rate to 2%. This has reduced the pace of increases from 75 points in previous interventions.

This operation was expected, following the decision of the Federal Reserve (FED), but we note that a slightly smaller increase did not lead to a change towards a less restrictive monetary policy. Not only that: many analysts even claim that the attitude of the ECB has been among the most aggressive ever.

In fact, Lagarde has communicated to the market its intention to continue the rate hike path for at least another 4-6 months on a constant basis.

This means that savings account rates could reach 4%.

How to get better returns?

To get an idea of ​​the current rates, take a look at the current overview of TOP Deposit Accounta free tool made available by Affari Miei.

To increase the interest rate, it is necessary to focus on longer maturities and term accounts instead of free ones which, by their nature, pay the saver less.

Have a good continuation of navigation on Affari Miei.