No change: High net interest losses by private households in Germany

In its economic report for August, the European Central Bank has calculated the change in net interest income for private households for the period 2008 to 2017. It comes to the conclusion that for Germany the decrease in interest income was only marginally larger than the decline in interest charged on loans. Consequently, the ECB suggests, the extremely low interest rates had only a minor influence on the net interest income of private households. The ECB is thus responding to the criticism (expressed above all by ourselves, too) of the impacts of its monetary policy.

However, it focuses in its computations mainly on interest income from deposits and bonds and excludes life and pension insurance policies. Yet in Germany, the latter constitute over 30 percent of total private financial assets. Although guaranteed minimum interest offers investors a certain degree of protection against falls in interest rates, the protracted phase of low interest rates has also eaten into the average yield on life insurances. This is attributable to the fact that the guaranteed minimum interest offered on new contracts has been successively reduced over time and the profit participation has melted away.

According to our calculations, German private investors have from 2010 to 2017 garnered about EUR 436 billion less interest income from deposits, bonds, and insurances than if there had been a normal level of interest. This compares with interest savings on loans of EUR 188 billion, which translates into a net interest loss of around EUR 248 billion over the last eight years.

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