Savings in traditional bank accounts have exceeded 1.5 trillion after the covid crisis, even losing money without interest
The failure of current account funds is one of the historic financial manifestations that have become more apparent over the past two years of crisis due to the pandemic. However, the money held in all types of deposits (term and sight) has increased over the past three years. And this despite practically 0% interest; that commissions and fees weighed this product; and even negative interest (that is, charging) that some entities have applied to certain companies for their money.
Now the nearly 1.54 billion euros that Spaniards have in bank deposits and checking accounts are waiting for their moment. That in order to achieve any return, however minimal, that satisfies the fact that most financial assets are left in this product, because the Spaniards in general do not like to invest.
Despite low profitability, Spaniards continue to rely on this risk-free savings product to mitigate inflation. At the end of 2021, 38.4% of the financial wealth of Spanish households will consist of deposits and cash, according to data from the Association of Collective Investment Institutions and Pension Funds (Inverco).
They do so in a time like the current one, which is particularly delicate in financial markets like the current one. Many mutual funds have undergone major corrections and even fixed-income securities (debt of countries or companies) are suffering.
The context may change with the new interest rate policy that the European Central Bank (ECB) plans to apply from July. The meeting on Thursday 17th will be key to analyzing the institution’s ability to exert pressure to curb rising inflation. In principle, an interest rate hike of 0.25 points is expected, compared to 0% at which the official price of eurozone money has been for more than seven years. The measure will reactivate the entire Spanish banking market in ten years, eager for interest.
However, the product in which the derivatives of this new monetary policy will be noticed will not be exactly the derivatives related to savings, but those related to debt. That is, mortgages and consumer loans.
This reality has been visible for two months in the case of loans to finance housing. The average rate at which Spanish entities provided mortgage loans was 1.624% in May, according to Bank of Spain data collected by the Spanish Mortgage Association (AHE).
For example, the average rate of mortgage loans for more than three years for the purchase of free housing provided by entities in Spain continued to increase compared to 1.540% in April and 1.507% a year earlier.
This is the highest level since November 2021, when an average rate of 1.661% was recorded. And this is despite the fact that the Euribor – the main benchmark for calculating mortgage payments in Spain – has not yet captivated its worst scare. Everything points to a close of June at an average of more than 1%. At the beginning of the year 2022, this was -0.50%. Negative.
More time will likely need to pass for this rate hike to be reflected in the interest offered by bank deposits, according to several industry sources. Checking accounts and similar products will continue to lack this appeal, especially since the fine the ECB demands for the money on them is still in effect for banks. In practice this is a hindrance.
Despite the lack of financial interest, families continue to set savings records. In term deposits alone, households added more than 982,000 million euros in April, 0.77% more than a month earlier. If they continue at the current rate of growth, they will hit a billion euros within three months. However, reaching that volume could be delayed for a few months, as households usually save less for the August holiday season.
Since the start of the pandemic in March 2020, Spanish deposits have been on an upward trajectory and have grown by 15% since then. On the one hand, the confinements and the closure of mobility have drastically reduced consumption, which promotes this saving. In addition, economic uncertainty about what might come next also made consumers more conservative. At the moment and with the pandemic already almost forgotten, however, it is still the custom to save money.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
