Deposit rates rally in Estonian banks ostensibly over

Money.
Money. Source: Siim Lõvi/ERR

While commercial banks in Estonia have been hiking rates of return on deposits in recent months, with annual fixed-term deposits fetching 3.5-5 percent interest, banks say that the rally might be drawing to a close.

Coop Pank is currently offering the best rate of return on an annual fixed-term deposit of 5 percent as part of a temporary campaign.

The bank's CFO Paavo Truu said that the offer is valid for fixed-term deposits over 12-17 months and deposits of at least €100. He added, however, that the bank's offer will remain below that after Midsummer Day as it currently exceeds the competitors' offers, the Euribor and ECB rates.

"Financial markets are of the mind that interest rates have or are about to peak and that things will start coming down again in the long run," he said.

Luminor offers a rate of return of 3.5 percent on 12-month fixed deposits. Estonia's leading commercial banks Swedbank and SEB offer 4 percent.

Representatives of most banks suggested that as rates of return on offer are on par or exceed the Euribor rate, which is forecast to plateau, interest on deposits will likely not grow further. Banks are nevertheless keeping a constant eye on the situation are will react accordingly.

The six-month Euribor rate, which governs the total interest rates of most home loans in Estonia, grew to 3.818 percent recently for its highest level in years. The last time Euribor neared 4 percent was in November of 2008.

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Editor: Marcus Turovski

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