High Stakes in the Deposit Market

While once all the excitement happened in the stock markets, now the thrill has shifted towards the deposit market. Kristiina Toomei, the Product Manager of Deposits at Holm Bank, discusses the trends in the deposit market.

She begins by referring to a term that has become commonplace in almost everyone's lexicon in the past year - Euribor. "The rise in Euribor rates, implemented to curb surging inflation, has sparked passionate discussions throughout Europe. While it has led to higher costs for home loans and car leases, it has also resulted in an upswing in deposit interest rates," explains Kristiina. She underscores that this is positive news for depositors, as Holm Bank and other financial institutions have significantly raised their deposit interest rates in the last six months.

Kristiina highlights that currently, the annual deposit interest rate at Holm Bank is 4%. "Among depositors, the one-year deposit period is the most popular choice. However, Holm Bank goes a step further by offering attractive interest rates for longer durations," she explains. Why is this significant? Kristiina poses a series of rhetorical questions and provides the answers herself. "Who has a crystal ball that can predict deposit interest rates 12 months from now? Will they remain at their current high level or start to decline?" To ensure that depositors can still enjoy high deposit interest rates in a year's time, it is worthwhile to consider longer-term agreements. At Holm Bank, it is possible to open deposits for up to 5 years. By opting for a longer-term deposit, you secure a fixed interest rate for the specified period, even if deposit interest rates begin to decline again. A simple calculation demonstrates the potential benefit. For instance, depositing €10,000 in a fixed-term deposit for 3 years at an interest rate of 3.55% would yield €1,080.78 in interest by the end of the deposit period, resulting in a total growth of 10.8% on the initial deposit amount," explains the Product Manager of Deposits at Holm Bank.

She reminds everyone that bank deposits are guaranteed by the state Deposit Guarantee Fund up to €100,000 per person per bank. This makes depositing in a bank safe - it is a stable and secure way to preserve and grow your money.

Kristiina also offers some small tips to consider when opening a deposit.

"Firstly, if you have a larger sum, consider opening multiple deposits. Fixed-term deposits can be terminated before the maturity date, but keep in mind that you will lose the accrued interest. If you find yourself in a situation where you need a portion of the deposited funds, you can terminate some of your deposits while retaining the others and continue earning interest on them," says Kristiina.

"Secondly, don't rush to terminate a deposit just because you see a slightly higher interest rate somewhere else. Consider how much interest you have already accumulated and whether it is reasonable to lose it.

Thirdly, always prefer depositing over simply keeping your free money in your bank account! Depositing, even for short periods, brings higher interest rates compared to no interest on your daily bank account," Kristiina highlights, providing three primary pieces of advice for depositors.

If you have any questions, feel free to seek advice from the bank's specialists.

Safe and profitable depositing!