Households move assets to deposit accounts with higher interest rates

With the rise in interest rates, the popularity of deposits with agreed maturity and of investment deposits has increased among Finnish households, while the popularity of overnight deposits has decreased, said the Bank of Finland in a release on Tuesday.

In January–September 2023, the share of agreed maturity deposits and investment deposits in households’ total deposits has increased by almost 7 percentage points, as households have moved almost EUR 7 billion of financial assets to deposit accounts with higher interest rates.

In the same period, assets held in overnight deposit accounts have contracted by EUR 8.5 billion.

At the end of September 2023, the total stock of household deposits stood at EUR 110.1 billion.

The majority of the deposits (EUR 74.6 billion) were overnight deposits, which also include transaction accounts.

Most of the overnight deposits (EUR 49.2 billion) were fixed-rate accounts with an average interest of 0%.

Of the total deposit stock at end-September, deposits with agreed maturity accounted for EUR 9 billion, and the share of investment deposits was EUR 26.5 billion.

At the end of September 2023, the average interest rate on the household deposit stock was 0.91%, compared with 0.05% in September a year earlier.

The rise in interest rates has led to a widening of interest rate differentials between the various deposit accounts.

In September, the average interest rate was 0.30% for the overnight deposit stock, 2.30% for the stock of deposits with agreed maturity and 2.15% for the stock of investment deposits.

The average interest rate on new agreed maturity deposits rose to 3.18% in September.

New agreements made in this deposit category totalled EUR 1.2 billion, compared with EUR 240 million in September a year earlier.

In the statistics, a large amount of deposits subject to restrictive drawing provisions have been reclassified from overnight deposits to investment deposits.

This has increased the amount of investment deposits and decreased the amount of overnight deposit.

Finnish households drew down new housing loans in September 2023 to a total of EUR 1.1 billion, a decline of EUR 450 million from September 2022.

Of the total, investment property loans accounted for EUR 101 million. The average interest rate on new housing loans rose from August, to 4.65%.

At the end of September 2023, the stock of housing loans stood at EUR 106.7 billion, and the annual growth rate of the loan stock was minus 1.8%.

Investment property loans accounted for EUR 8.6 billion of the housing loan stock. At the end of September 2023, Finnish households’ loan stock comprised EUR 17.1 billion in consumer credit and EUR 17.8 billion in other loans.

Finnish non-financial corporations drew down new loans in September in the amount of EUR 1.8 billion, of which EUR 360 million was to housing corporations. The average interest rate on new corporate loans fell from August, to 5.45%.

At the end of September, the stock of loans to Finnish non-financial corporations stood at EUR 106.1 billion, of which loans to housing corporations accounted for EUR 43.6 billion.