A Looming ECB Decision: Brace Yourself for Lower Savings Rates
Records Break as Interest Rates Experience Largest Yearly Dip in Over a Decade and a Half
Get ready, folks! Today, the European Central Bank (ECB) is anticipated to slash deposit rates again. After a long stretch of only modest decreases, the savings rate landscape has taken a dramatic turn for the worse. However, don't sweat it too much — fixed-term deposits can bring a bit of peace to savers.
Banks are presently receiving an interest rate of 2.25% from the ECB for storing money with them. The bigwigs at the ECB are about to drop another decision, and most market gurus are expecting a further cut.
The average interest rates on widely available savings account offers have taken a nosedive by 0.29 percentage points since early February, now averaging at a mere 1.27%. Back in February, the average interest rates were still a respectable 1.56%, but they've tumbled by a total of 0.29 percentage points over the past four months. That's the steepest decline in such a short span since recording began in January 2012.
According to an interest rate analysis by comparison portal Verivox, which evaluated around 800 banks and savings banks, the current savings account interest rates have been steadily falling. Even when the ECB first set its deposit rate to zero way back in 2012 and then pushed it further into negative territory in subsequent years, savings rate declines have never been as swift or as drastic as we're witnessing right now.
Savings Accounts: Steep Plunge
Oliver Maier, CEO of Verivox Financial Comparison GmbH, explains why savers are feeling the heat. "Thanks to cutthroat competition in savings accounts, most banks took a gradual approach to adjusting their conditions at the start of the current interest rate cut cycle. However, they're now passing on the falling interest rates to their customers to a much greater extent," he says.
Savings account interest rates continued to slide in May, although at a less rigorous pace due to already abysmally low starting levels. Nonetheless, savers at savings banks and cooperative banks are still saddled with noticeably lower interest rates than those at nationwide banks, on average.
However, those who compare offers can land significantly better deals. Plenty of banks in Germany still offer savings account interest rates at or above 2%.
Comparing Savings Accounts
Fixed-term deposit interest rates have also steadied, but at a considerably slower pace. Five-year fixed-term deposit interest rates dropped by a mere 0.01 percentage points last month and now sit at 2.09%. Two-year fixed-term deposit rates fell by 0.06 percentage points, landing at the current 2.00%. One-year fixed-term deposits experienced the most significant decline, dropping by 0.08 percentage points, bringing the average down to 1.97% - putting it below the coveted 2% mark for the first time since February 2023.
According to Verivox, banks have factored their fixed-term deposit conditions with a certain lead time, taking into account how they believe interest rates may fluctuate in the future. Since most market participants assumed that the current interest rate reduction phase was nearing its end, fixed-term deposit interest rates had only been easing modestly in recent times.
Decline in Fixed-Term Deposit Interest Rates: Moderate Slump
Source: ntv.de, awi
- EZB
- Interest
- Inflation
- Investment
- Wealth
- Savings Account
- Term Deposit
[1] European Central Bank (2025). "Monetary policy decisions." [Online] Available: https://www.ecb.europa.eu/mopo/implement/rates/html/index.en.html[2] Deutsche Bundesbank (2025). "German inflation rate." [Online] Available: https://www.bundesbank.de/Content/EN/Statistiken/Inflation06/Inflation06_030428.html[3] European Investment Bank (2025). "Economic outlook for the euro area." [Online] Available: https://www.eib.org/en/economic-Research/Pages/Euro-Area-Outlook.aspx[4] European Central Bank (2025). "ECB announces interest rate decision." [Online] Available: https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250417_1~dfec88b1a0.en.html[5] Verivox (2025). "Savings account interest rates - comparison and analysis." [Online] Available: https://verivox.de/sparkonto-vergleich/
In light of the ECB's anticipated further interest rate cuts, it may be prudent for individuals to reassess their personal-finance strategies. While savings account interest rates have plunged sharply, those who compare offers can still find accounts offering rates above 2%. On the other hand, investing in fixed-term deposits could provide a bit more stability, as the decline in fixed-term deposit interest rates has been moderate compared to savings accounts.