Spanish banks have not only held deposit payouts steady for private customers but have actually reduced them. The average rate on new household deposits in January stood at 0.59%, down from 0.64% in December. While the change may seem minor, it highlights how Spain and Cyprus were among the only eurozone sectors to lower wage-like deposit yields in that period, according to data released by the European Central Bank on Friday. These savings products were observed across 19 euro area countries.
In response, euro area banks raised new deposit rates on average by 0.19 percentage points, paying families 1.64% in January, more than double the rate seen in Spain. Malta posted 0.38, Slovakia 0.29, Belgium 0.28, and Luxembourg and Austria 0.27, while Spain saw only a modest uptick, as did Cyprus with a 0.15 point rise. Other notable increases occurred in several countries, underlining a mixed but overall upward trend across the region.
Spain remained among the lower tier in the euro area for new deposit yields, ranking fourth behind Portugal at 0.56%, Greece at 0.49%, and Cyprus at 0.25%. On the opposite end, countries such as France, Italy at 2.12%, Slovakia at 2.06%, and Austria and Belgium at 2.03% reported higher payouts, with families in these nations earning about 2.37% on average in January.
The lower deposit payouts in Spain came as mortgage rates also rose. The January increase was 0.28 points, placing it among the six highest rises in the euro area for the month and above the regional average of 0.16 points. Home purchase loans taken by households carried an average interest rate of 3.19%, above the euro area average of 3.1% and still among the seventh lowest in the monetary union. The profitability gap for banks from new customers widened, with the spread between mortgage and deposit rates increasing from 2.27 to 2.6 percentage points.
control print
The decline in the fee paid by Spanish banks for deposits occurred alongside growing pressure to raise these payouts. ECB chief Christine Lagarde urged customers on Thursday to engage with their banks to demand higher deposits, stating that customers should have such conversations and that bankers should respond if they wish to retain clients. The alternative is to switch banks, she noted in an interview on Antena 3.
Lagarde also highlighted that Spanish banks have lagged behind other European lenders in returning liquidity to depositors. Banks were urged not to forget the obligation to pay deposits, a point she emphasized as already happening in several European countries, though not yet widely in Spain. She encouraged consumers to pursue discussions with their banks as part of the broader effort to align savings practices with policy goals.
inflation and profit
The ECB wants banks to increase deposit payouts to help meet its policy aim of taming inflation. Raising benchmark rates is intended to cool demand by making borrowing more expensive and by boosting the appeal of saving. Higher deposit yields can encourage households and firms to save rather than spend or invest, which contributes to easing price pressures.
Spanish banks have resisted sizable increases in deposit yields for months. They argue that when ECB policy rates are negative, passing these rates to individual customers would require charging for deposits, a move that would likely hurt retail business. Banks contend they currently have ample liquidity and do not need to pull deposits, pointing instead to mutual funds and public debt instruments as more attractive savings vehicles despite higher commissions.