Spain Sees Low Deposit Rates Amid Mixed Banking Trends
The latest European data show that Spain’s banking sector continues to offer comparatively low deposit returns, a pattern that contrasts with several peers across Europe. Banks in Spain promised households an average return of about 1.41% on new deposits contracted in April, a figure that remained subdued in March. This environment places Spain below the European average, and it marks a widening gap since the end of last year. Among euro area members, only a handful of countries posted lower deposit rates for new contracts, underscoring Spain’s relatively muted pricing for savers.
By comparison, euro area members such as Italy (3.08%), France (2.95%), Lithuania (2.68%), Estonia (2.66%), and Belgium (2.65%) reported notably higher rates for new deposits in the same period. The April rate for Spanish households thus remained well below the euro area average of 2.27%, and the divergence has grown since the close of the previous year, widening from about 0.80 to 0.86 percentage points. Looking back to the start of 2021, the gap had been much smaller, around 0.17 points, before the recent shifts in official rates intensified to tackle inflation.
Despite a rising cost of money, the flow of new time deposits showed some momentum through early 2018, with a rise of 0.89% to 1.31%. April, however, yielded only modest growth, stabilizing at 1.41% — the highest since early 2014. The average interest rate on household term deposits stood at roughly 0.7%, reflecting the cautious pricing of new products as savers faced a slow upward drift in rates and the overall euro area’s 1.61% average for the term deposit segment.
Cheaper Savings for Households
In practice, much of the funds held by Spanish households sit in current accounts, which offer minimal or no interest. Of the roughly 986.4 billion euros households held in banks in April, around 92.4% resided in current accounts with near-zero returns, while roughly 7.6% sat in time deposits with an average rate about 0.7%. This disparity highlights how many savers earn little from idle balances when the majority of products are priced at rates that favor banks over depositors.
Even as new time deposit rates align with current market conditions, households maintain a fairly even split between checking accounts and term deposits. By 2014 numbers, almost 755.5 billion euros were distributed almost evenly between these categories, with checking accounts offering near-zero returns and term deposits yielding around 1.39%. The result is a challenging environment for households trying to reduce debt costs, given that banks often use loan pricing to support marginally higher returns on deposits while passing the impact of rate changes mainly to new loans rather than existing products.
Recent industry projections point to a continued emphasis on savings behavior. Bank of Spain analyses suggest that savings in the sector could trend higher, though the pace of deposit rate increases may stay modest in the near term. This dynamic underscores the broader pattern across the euro area, where deposit costs for banks and the pricing of new products evolve under the influence of monetary policy and inflation expectations.
The other side of the coin lies in lending. Banks frequently employ a strategy that defends lower deposit fees while still offering mortgages at attractive levels. Spain, in particular, has been among the countries with lower average mortgage rates in the euro area in recent months, though the rate gap between mortgage types and deposit products remains substantial. Mortgage offerings continue to reflect competitive pricing, yet the overall cost of funds for banks remains a key driver of how deposits and loans interact in the market. Market dynamics show that the cost of money and the returns on new customer deposits influence the structure of lending and savings across the country, with policy shifts and bank-level strategies shaping the path forward. In this context, the eurozone’s broader trends provide a backdrop for Spain’s ongoing experience with savers and borrowers alike, shaping decisions for households, financial institutions, and regulators alike. (Citations: ECB data, Bank of Spain analyses)