Over a third of Germans remain unaware of the concept of negative interest rates.
Negative interest rates have become a topic of concern for many German savers, according to a survey conducted by Union Investment's robo-advisor, Visualvest. The survey revealed that almost every third German is unaware of the financial term 'negative interest rates' or 'penalty rates'.
The survey findings suggest that Germans, traditionally averse to risk and highly savings-oriented, are facing difficulties as negative interest rates reduce returns on low-risk savings accounts and fixed income products. In response, Germans are shifting their investment strategies cautiously, seeking assets that can still yield positive or at least better returns than near-zero or negative-yielding deposits.
This shift includes increased interest in equities, real estate, and alternative investments as savers seek to preserve capital growth or income. The survey showed that only 18% of respondents would invest their current account money in securities, indicating a preference for more conservative investment options.
Regarding the handling of negative interest rates on deposits, German households and banks have adapted with some resistance. Banks have increasingly passed on the burden of negative interest rates by charging fees or negative interest on large deposits, though widespread application to small retail account balances remains limited due to competitive and regulatory considerations.
German savers have shown tendencies to withdraw cash, diversify savings, or invest in physical assets to avoid negative yield on deposits. If penalty interest rates were applied to their deposits, almost three out of four respondents (72%) would switch banks or distribute their money across multiple accounts to keep amounts low.
The survey also revealed that a majority of Germans (65%) express anger at the thought of paying penalty interest rates, and 59% fear a reduction in their savings. The lack of understanding was particularly prevalent among young and female savers, with 43% of 18-34-year-olds and 41% of women admitting they didn't understand the concept.
Despite these challenges, the survey results are representative, according to Visualvest. The broader fiscal context also informs behavior. Recent signals indicate Germany is loosening fiscal policy after years of strict debt brakes, aiming for economic renewal and growth, which may impact interest rate dynamics in the medium term.
The survey involved 2,055 local adults, and it's worth noting that the prospect of paying penalty interest rates makes 16% of respondents prefer to pay negative interest rates rather than switch banks due to perceived complexity.
In summary, Germans handle potential negative interest rates on deposits by seeking alternative investments and adjusting savings behavior, as low or negative returns on deposits incentivize more active capital deployment. Fiscal changes and cautious monetary policy shape the evolving landscape for these strategies, promoting a gradual shift in German saving and investment habits.
Other investors are opting for personal-finance strategies that involve assets like equities, real estate, and alternative investments, aiming to secure positive or better returns than near-zero or negative-yielding deposits. The lack of understanding about negative interest rates, particularly among young and female savers, raises concerns about the financial literacy of the general population.
