Record deposits in anticipation of the ECB rate rise

One of the most significant historical financial expressions is that the money in the current account doesn't earn. This has been more apparent in the past two years of crisis because of the pandemic. In the past three years, however, all types of deposits have seen their money grow (term and sight). This is despite the fact that there is virtually no interest. However, fees and commissions have reduced this product. Some entities even applied for negative interest (that's, charging) to their money.

The 1.54 billion euros in bank deposits and current account funds that the Spaniards hold are now waiting for their turn. This is the possibility of achieving some return, however small, by selling most of your financial assets. The Spanish are generally not interested in investing.

Even though the profitability is low, the Spaniards still rely on this risk-free savings product in order to lessen the inflationary blow. According to data from Inverco, 38.4% of Spanish families' financial assets are cash and deposits at the end of 2021.

They do this at a time such as the present, which can be especially sensitive in financial markets like the current. Many investment funds have experienced large corrections, and fixed income (debt to countries or companies) is also in trouble.

With the new interest rates policy the European Central Bank (ECB), which will be in effect from July, the context could change. It will be crucial to examine how far the institution can push to fight rising inflation at the meeting on Thursday 17th. A rate increase of 0.25 points is possible, as opposed to the 0% official price for euro zone money since more than seven decades. This measure will bring back the Spanish banking market that is eager to earn interest for a decade.

The product that will be noticed by the new monetary policy's derivatives will not be those related to savings but will be those of debt. This includes consumer loans and mortgages.

This is evident in the case of loans to finance housing. According to data collected by the Spanish Mortgage Association, the average rate at Spanish entities that granted mortgage loans was 1.624% in May according to the Bank of Spain.

The average interest rate on mortgage loans for longer than three years to purchase free Spanish housing continued to rise, compared to 1.507% in April and 1.540% a year ago.

This is the highest level it has been since November 2021 when an average rate was 1.661%. This is despite the fact the Euribor, the benchmark used to calculate Spanish mortgage payments, has not experienced its worst nightmare. All signs point to June closing at an average rate of over 1%. It was at -0.50% at the start of 2022. Negative.

Multiple sources within the sector indicate that it will take longer for this rate increase to reflect in bank deposit interest rates. This attraction will not be available to current accounts or similar products, largely due to the ECB penalty for money that is kept in them. This is a disincentive.

Families continue to save despite the lack of financial interest. In April, households saved more than 982,000,000,000 euros, which is 0.77% more than the previous month. They will reach a billion euros if they keep growing at the current pace in three months. But, this volume may not be reached in the timeframe expected. This is because households tend to reduce their savings during August holidays.

The Spanish deposits have been on an upward trajectory since March 2020 when the pandemic began. They have grown by 15% every year since. One, the restrictions and closure of mobility dramatically reduced consumption, which encouraged saving. The consumer became more cautious due to uncertainty over the future. Despite the fact that the pandemic is almost over, it's still a good idea to save money.