Israeli Savers Earn Little on Accessible Deposits Amid Falling Interest Rates
Translated & summarized from Bizportal by baba
Israeli households are earning minimal interest on accessible bank deposits, with average annual rates on daily deposits around 0.67% in September. A significant portion of household savings, 14 billion shekels, was held in short-term deposits (up to one month) yielding an average of 1.36%. Longer-term deposits offered higher rates, averaging 3.54% for six months to a year, though significant bank variations exist. Experts advise savers to assess liquidity needs, commitment duration, and net returns after taxes and fees.
The story in 6 lines · by baba
- Average annual interest on accessible Israeli bank deposits was about 0.67% in September.
- 14 billion shekels were deposited in short-term accounts (up to one month) in September.
- Short-term deposit rates fell to 1.36% in September from 1.56% in August.
- Six-month to one-year fixed deposits averaged 3.54% in September.
- One Zero offered 6.00% on specific new customer deposits, significantly higher than other banks.
- Longer-term deposits (1-5 years) yielded between 2.93% and 3.22%.
Israeli households are earning minimal interest on readily accessible bank deposits, with average annual rates on daily deposits hovering around 0.67% as of September, according to Bank of Israel data. This translates to approximately 56 shekels per month on a 100,000 shekel deposit, before taxes and assuming constant rates. While keeping funds liquid for potential large expenses or income instability is understandable, many savers leave money in these low-yield accounts for extended periods without reassessing returns.
In September, household deposits in non-indexed shekel accounts totaled about 32.7 billion shekels. A significant portion, 14 billion shekels (42.7%), was held in accounts with terms of up to one month, including daily and weekly deposits. The weighted average annual interest rate for these short-term deposits was approximately 1.36%, a decrease from August's 1.56%. Daily deposit rates also fell from 0.92% to 0.67%, with deposit volumes dropping from 8.1 billion to 6.3 billion shekels.
Longer-term fixed-rate deposits offered higher returns. In September, about 8.6 billion shekels were deposited in accounts with terms of six months to a year, yielding an average of 3.54%. However, significant variations exist between banks, with some offering considerably higher rates than others. For instance, One Zero offered 6.00% on new customer deposits under specific conditions, while Hapoalim averaged 3.77% for this category.
Even longer terms did not guarantee higher rates, with average annual yields for one-to-two-year deposits at 3.22%, two-to-three years at 2.93%, and three-to-five years at 3.01%. Financial analysts suggest that savers should carefully consider the required liquidity, the duration for which funds can be committed, and the net return after taxes and fees before making deposit decisions.
Daily money market funds are presented as an alternative for accessible funds, offering average monthly yields around 0.26% in September. While these funds provide liquidity within one business day, their returns are not guaranteed and vary based on market conditions. Tax implications also differ, with money market funds typically subject to a 25% capital gains tax on real profit, compared to a 15% tax on nominal interest for non-indexed shekel deposits.
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