With the first savings rate of 0%, the chance of a negative savings rate in the Netherlands is growing. Will the interest rate be negative in 2019 and what are the consequences?
Do we get a negative savings interest in the Netherlands?
The savings interest rate continues to fall. There are now banks in the Netherlands with a savings account without interest (0%) for the first time. The major banks, Goodbank, IGood Finance, are only 1 step away from this one with a savings rate of 0.03% savings. When will we receive the first negative savings interest in the Netherlands?
Cause of the low savings rate
The European Central Bank wants to boost spending in the Eurozone (and therefore inflation) with a low interest rate. Saving then becomes unattractive and investing and spending money is attractive. This is also the reason that mortgages and borrowing consumer money are now cheap.
An important policy instrument of the ECB is the deposit rate. This is the rate at which the banks deposit their savings at the central bank. The ECB deposit rate is currently -0.4%, negative.
Banks are already paying for savings
Banks cannot immediately lend all the savings again. To park the savings at the central bank, however, they pay a penalty interest. Banks will only do this in the most extreme case. The savings are first offered on the money market (supply and demand of short-term loans). The ECB is also reducing interest rates there by offering cheap money. This ensures that savings on the money market yield little to nothing.
Banks have not fully passed this low and sometimes even negative interest rate to the customer. This ensures that savings rates are still falling, despite the fact that the last ECB interest rate falls dates from March 2016.
Negative savings interest in 2019?
In the meantime, savings rates at many banks are one step above or even at 0%. A negative savings interest, however, is a major (psychological) step that is postponed as long as possible in the context of customer retention. Banks cannot allow customers to collect their savings on a mass basis. Banks are therefore in a difficult position and the question is how long they will last.
For the time being, there are no signs that the policy interest rate will rise in the short term (read our savings rate forecast for 2019). The chance of a negative interest rate therefore remains present. However, savings rates have become so low that we expect fewer interest rate cuts in 2019. This is despite the expectation that the mortgage interest rate will rise slightly in 2019. Read why the savings interest does not increase automatically.
In the meantime, there is a lot of media attention about the negative savings interest. Last year, Goodbank adjusted their system to be able to offer savings accounts with a negative rate. Recently, Triodos, the first bank in the Netherlands with a savings account without interest, indicated that it would not exclude a negative savings interest. ABN AMRO indicated the same earlier. Are the spirits matured here for a negative interest rate?
Interest already negative abroad
In Germany, the internet bank bankZ is the provider with a negative interest rate. The Wallstreet Journal with an article about two Swiss banks where the savings interest on deposits is negative. These foreign examples are about large amounts of savings (from € 500,000) that are locked up for a long time. Striking: in Belgium, a negative savings interest is prohibited by law. In the Netherlands this prohibition does not exist and will not be introduced.
At the same time, there are foreign banks that offer higher interest rates in the Netherlands. Saving abroad has become easy now that you can also close a savings account across the border via a Dutch platform. Savedo and Raisin offer this. Read more about saving abroad.
4 tips to prevent a negative savings interest
- Choose the highest savings rate and switch with (part of) your savings.
- Save deposit View our selection including a few foreign banks.
- Saving with conditions: a higher interest rate with a fixed monthly contribution.
Not saving, but more return on your assets. Start investing.
Savings interest negative. What then?
The Netherlands Authority for the Financial Markets (AFM) investigated what the Dutch would do in the event of a negative interest rate. Only 12% would leave the savings in the freely withdrawable savings account. The other respondents chose the following options:
- Physical storage (the familiar ‘old sock’) (34%)
- Investing (20%)
- Pay off debts (18%)
- Save deposit (11%)
- Publishing (5%)
Do you think the savings interest will become negative in 2019 and what would you do in that situation? We would like to hear it in a response below this article.