Deposit interest rates are higher today than projected inflation

A survey commissioned by Holm Bank and carried out by the research company Norstat has revealed that many Estonians refrain from opening a term deposit because they want to retain access to their money at all times. In addition, many of those who do not open deposits want to earn a higher return, even though they are aware that their cash or bank account savings are constantly shrinking due to inflation. 

“According to the Bank of Estonia, the current accounts of local residents today contain an estimated 8 billion euros in savings, with this money constantly losing value due to rising prices,” said Holm Bank’s CEO Kaspar Kalvet. “We wanted to find out why so many people are shying away from term deposits and what would convince them to do so. More than a third of the respondents said they prefer not to open deposits because they do not know what their spending will be in the near future. They want to be sure that they can access their money at any time.” 

“At the same time, many people have experienced that spontaneous spending is one of the main reasons why their bank account savings are dwindling steadily. One in five survey participants mentioned the fear that their current spending would result in a loss of savings,” said the CEO of Holm. 

In fact, as Kalvet explains, opening a deposit does not mean that a person loses access to their money for years. For instance, one can spread their money across several deposits for different periods. 

“Holm offers the highest interest rate on the market, 4%, on all new deposits until 20 October, regardless of the deposit period. Such an offer allows a person to choose the deposit periods that suit their savings. Even if one prefers a shorter deposit period, that money will be unavailable for spontaneous purchases. If necessary, once every few months they receive a portion of the deposited amount, together with the interest earned, which can then be redeposited or spent as needed,” recommended Holm’s representative. 

Thirty-seven per cent of respondents say they have not decided to open a bank term deposit because they do not think the interest rates are attractive enough. At the same time, 55% of respondents admitted to being concerned about the devastating impact of rising prices on their savings. According to Kalvet, this is a legitimate concern. 

“Inflation was at 3.2% in August this year, which means that a person with 5,000 euros in their account has lost around 160 euros due to inflation. But if that person had a term deposit, they would earn 200 euros instead. Why give up such a bonus? Deposits are the most reliable ‘inflation insurance’ and with the attractive interest rates still available, it is possible to safely grow one’s money for up to five years,” the CEO of Holm assured. 

He pointed out that the 4% interest rate offered by Holm is well above the current inflation rate and short-term projections. “This is an opportunity worth seizing as all the signs are indicating that deposit rates will continue to fall in 2025,” he said. The bank’s CEO also noted that deposits are protected by the Guarantee Fund to the value of 100,000 euros per depositor in each bank registered in Estonia. This gives depositors the reassurance that even if something happens to the bank or the economy, they will get their money back. 

Holm Bank offers term deposits to both private and business customers.