Fixed-Term Bank Deposits Market Overview – Interest Rates Collapsed in October, Decline Continues

As of the end of October, both Bigbank and Holm Bank offer the best interest rates of 4 percent for three and six-month fixed deposits for individuals, and in the one-year and two-year deposit segments, the best offer is Holm Bank's 4 percent campaign rate. However, most banks have already significantly reduced deposit interest rates and the trend continues, according to a fresh market overview.

According to Jonna Pechter, head of Bigbank Estonia, October was a turning point month regarding average interest rates offered to individuals for fixed bank deposits.

"On October 21, the 6-month Euribor already fell below 3%, and this indicator, which plays a central role in Estonia's lending market, undoubtedly also affects the fixed deposit market, albeit with a certain lag. The decline has been rapid and according to current forecasts, it should continue in the same manner. For borrowers this is good news, but unfortunately bad news for savers, and expectations for the interest earned on savings must inevitably continue to be revised downwards," noted Pechter.

Over the past month, the interest rate paid by most banks on fixed deposits has decreased by 0.10-0.40 percentage points, with Holm Bank as the only exception, which has temporarily increased the interest rate offered as part of its deposit-gathering campaign. TBB Bank is definitively ceasing operations, which with its October interest rate cuts has essentially exited the deposits market. "In the longer term, that is, regarding the further development of interest rates for one-year or two-year deposits, a good indicator is already today the 24-month deposit interest rate in effect in more than half of banks, which ranges from 2.00-2.50% per annum," Pechter drew attention.

In a rapidly changing interest rate environment, according to Jonna Pechter, a financially savvy depositor must perform a thorough price comparison before concluding a fixed deposit contract, as the price of essentially the same product differs significantly between banks. "Out of pure convenience, either extending a deposit with your main bank or concluding a deposit agreement as an advertising victim at the first bank you happen to come across, you can do yourself a disservice and give away nearly a quarter of the money you would earn from your savings," explained Jonna Pechter on the need for homework in managing one's finances.

And the first decision regarding deposits should, according to Pechter, be that larger sums should not be left sitting in a current account, as the money owner earns nothing from it. "The difference is clear – either your money earns for the bank or for you. For example, 10,000 euros sitting in a current account earns essentially nothing for the depositor, but putting the same amount even for a year in a 4% fixed deposit brings in already 400 euros in interest."

This overview clearly covers only the bank deposits market and excludes the fees paid by loan and savings unions or financial intermediation and trading platforms for placing money with people, as the sums placed there are not covered by Deposit Guarantee Fund protection. "If a money owner wants to sleep peacefully, then they must take into account when depositing that the Deposit Guarantee Fund's 100,000 euro guarantee applies only to money deposited in commercial banks," explained Jonna Pechter.

According to the latest official statistics published by the Bank of Estonia, as of the end of August, the total amount of deposits in Estonian banks was 30.8 billion euros and compared to the previous month, the deposit volume decreased by 120 million euros. The volume of household, that is, individual deposits was 12.4 billion euros in August, which is 3 million euros less than the previous month and 999 million euros more than the same period last year. In this regard, the volume of fixed-term deposits grew by 41.8% year-on-year.

October 2024: Fixed deposit interest rates offered by Estonian commercial banks to individuals

Fixed deposit	3 months	6 months	12 months	24 months
Bigbank	4.00%	4.00%	3.80%	2.80%
Citadele	2.75%	2.85% (-0.35)	2.75% (-0.40)	2.00% (-0.50)
Coop pank	3.60% (-0.15)	3.50% (-0.20)	3.30% (-0.20)	2.50%
Holm Bank	4.00% (+0.20)	4.00% (+0.20)	4.00% (+0.10)	4.00% (+0.50)
Inbank	3.10%	3.80%	3.80%	3.40%
LHV	3.60% (-0.15)	3.50% (-0.25)	3.30% (-0.20)	2.50%
Luminor	3.50% (-0.10)	3.30% (-0.20)	3.00%	2.00%
SEB	3.50%	3.45%	3.25%	2.25%
Swedbank	3.35% (-0.25)	3.25% (-0.25)	3.10% (-0.20)	2.25% (-0.25)
TBB	0.01% (-3.79)	0.01% (-3.24)	0.01% (-2.99)	0.01% (-1.99)

* banks in alphabetical order
** in green: the best offer on the market for the period
*** in red: change in percentage points compared to September