Interest rates are back – What does this mean for savers and borrowers?

With the increase in the key interest rate from zero to 0.25 percent, the European Central Bank (ECB) is initiating a turnaround in interest rates in the euro area. What does this step mean for consumers? What happens to your savings? Is it worth going back to the good old savings book? And what does this decision mean for borrowers who dream of owning their own home?

policy rate
A key interest rate is the interest rate set by the responsible central bank at which commercial banks can obtain money from a central or central bank. In the eurozone, the European Central Bank (ECB) is responsible for setting interest rates.

Inflation rate absorbs interest on savings

When interest rates go up, there tends to be more interest on savings. At first glance this sounds good, but on closer inspection it’s not really attractive. The reason: While it is true that there will soon be interest income again for money on the passbookto the Daily or fixed deposit account there are, but the increase of 0.25 percent interest is currently offset by an inflation rate of more than seven percent. All in all, this still means a big minus for the so-called real interest rate. Instead of growing due to higher interest rates, the sum of money is shrinking due to the high inflation rate. It is currently not worth storing large amounts of money in the account with the hope of a return.

Dispo becomes more expensive, negative interest is eliminated

For overdraft borrower the increase in the key interest rate is not good news. According to experts, the overdraft interest will also increase as a result of the measure. Bank customers have to pay more interest for the borrowed money in the minus.

However, good news for account holders is that the Custody Fees for sums of money above a certain amount should soon be history. This so-called Negativzins According to experts, this should be eliminated from most financial institutions. Currently, banks still have to pay 0.5 percent interest when they borrow money from the ECB. Many institutes pass this burden on to private customers as a so-called custody fee.

Loan price increases

Both interest on loans there will be an increase. So the fees that customers pay to the bank to borrow money are getting higher. The banks are thus passing on their higher costs for the more expensive money lending from the ECB to customers. As a rule, the interest on the loan is higher than the interest on the deposit. If the difference continues to rise, it means that car loans, lease payments and other consumer loans will increase in price.

In addition, the past has shown that banks are often quicker to pass on an increased interest rate on loans than they are when crediting interest on savings. Consumers are therefore asked to pay more quickly when they borrow money from a bank than, conversely, they are paid interest on their savings.

Also impact on construction loans

According to experts, the increased key interest rate will also increase Baukredit affect. Accordingly, loans will become more expensive because the interest rates on borrowed money will increase in the long term. Higher interest rates primarily affect those who need a new loan or follow-up financing for a real estate loan. In the case of current construction loans, the interest rate does not change.