Israelis Increase Long-Term Deposits Amid Falling Interest Rates
Translated & summarized from Calcalist by baba
Israeli households deposited 1.21 billion shekels in long-term fixed-rate savings accounts in October, a 29% increase from September, driven by falling interest rates. Despite this trend, most new deposits, 43%, were in short-term accounts of up to one month. The Bank of Israel expects further interest rate reductions, encouraging savers to lock in current yields. Non-interest-bearing checking accounts held 237 billion shekels in September.
The story in 5 lines · by baba
- Israeli savers deposited 1.21 billion shekels in long-term accounts in October, a 29% monthly increase.
- Deposits in three-to-five-year fixed-rate accounts surged 338% compared to October last year.
- Falling interest rates are prompting savers to secure fixed returns on longer-term deposits.
- Despite long-term growth, 43% of new deposits were in accounts of one month or less.
- Non-interest-bearing checking accounts held 237 billion shekels in September.
Israeli savers significantly increased their deposits in long-term fixed-interest accounts during October, a trend attributed to a declining interest rate environment. Households deposited 1.21 billion shekels in three-to-five-year fixed-rate accounts, marking a 29% rise from September and a 338% surge compared to October of the previous year. This represents the second consecutive month of sharp increases, with total deposits in these accounts doubling in two months. Despite this growth, the average interest rate on these longer-term deposits remained relatively stable, around 3.05% in October, and was lower than rates offered on shorter-term deposits.
One potential reason for the increased interest in longer-term deposits is the desire to secure a fixed return amidst expectations of further interest rate cuts by the Bank of Israel. The central bank anticipates reducing the current 3.25% interest rate to 3% in the coming year. Fixed-rate deposits offer certainty of return, unlike variable-rate accounts whose yields may decrease with falling interest rates.
Conversely, deposits in one-to-two-year fixed-rate accounts saw a 10.2% decrease in October, while six-month to one-year deposits fell by 1.9%. Overall new household deposits in October totaled 32.7 billion shekels, remaining largely unchanged from September. Despite the rise in long-term savings, a substantial portion of funds, 43% or 14 billion shekels, were placed in very short-term deposits of up to one month, including daily and weekly options.
The largest category of deposits in October was for six months to one year, totaling 8.91 billion shekels. Within this category, fixed-rate deposits yielded an average annual interest rate of 3.55%, with some banks offering significantly higher rates as promotional offers. Meanwhile, large sums continue to be held in non-interest-bearing checking accounts, which stood at 237 billion shekels in September.
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