Greek banks: Term deposits on a new footing

Systemic lenders are gradually increasing returns offered on time deposits. The start was made last week by Alpha Bank and Eurobank, which adjusted interest rates from  a range of 0.01% – 0.03% to 0.02% – 0.20%.

National Bank and Piraeus Bank will follow in the next few days, most likely after the upcoming Board of Directors meeting of the European Central Bank (ECB) on Thursday, in which the further tightening of monetary policy will be decided.

The main feature of renewed products is that the longer the duration of the deposit, the higher the reward in terms of interest or even reward in kind.

The reason is that European interest rates are on an upward trajectory to control inflation.

The 3-month euribor has now exceeded 1.50%, i.e. it is above the ECB interest rate, from negative territory just last July.

It will maintain its upward trajectory at least until the beginning of 2023.

In the base scenario, in its upcoming meeting, the Eurobank’s Board of Directors will adjust its intervention rate from 1.25% to 2%, while there are also some analysts who argue that the adjustment will be in the order of 100 basis points. In this case it will rise to 2.25%.

This means that by the end of the year banks will be forced to proceed with new interest rate increases on term deposits, in order to adapt to the new data of the European money market.

The dilemma

So the question that arises for savers is this: Should they lock in their return at higher levels for as long as possible, for example for 12 months, or should they prefer shorter-term programs, so that at the first renewal of their term they can secure a better interest rate?

The only thing that is certain is that the yields will increase even more. However, the question for determining the most advantageous option is how much and when.

The flexible solution

Ονε solution for those who want to ensure the highest possible interest rate and at the same time have the opportunity to renew their deposit when yields increase again, are the banks’ flexible programs.

These term deposits allow early withdrawal of all money, without penalty, on the day of interest payment.

In this way, the saver maximizes his return for the first months and can periodically, even every 30 days, interrupt the program, without any charge, and open a new account with a better interest rate.

A banking source points out that we are entering a period where fixed-term products will regain demand.

Ιnterest-free “parking” for 114 billion euros

The truth is that the pool of open demand products (Savings, current accounts) is currently huge. Last August around 114 billion euros were “parked” in accounts , with interest rates at or slightly above 0%.

Therefore, the returns on term deposits may currently be low, but for money that is just sitting and since there is no prospect of investing it elsewhere, savers may receive even some, even small, interest.