Low Interest Rates are Costing Every Austrian 2,366 Euro
Due to the ongoing low interest rate environment, Austrian savers had to forego around EUR 35.5 billion in interest income over the past five years (2010-2014). On average this amounts to approx. 4,156 euro per capita. Of this, interest earned on deposits alone on average amounted to EUR 24 billion less than in the years 2005 – 2009. Anyone who invested his money in residential real estate has reason to be pleased, as prices have risen by more than a third since 2009. On stock exchanges significantly larger gains could be achieved as well, but only 3.3% of Austrians are directly invested in equities.
If one looks at credit, interest payments on loans were around EUR 15.3 bn. lower than in the time period 2005-2009.
This is equivalent to savings of 1,790 euro per capita.
“If one offsets the interest foregone on savings against the interest expense saved on loans, the result is a loss in the amount of 2,366 euro per Austrian citizen”, explains Thomas Uher, CEO of Erste Bank.
The reason for this is that Austrians have more assets than debt. In some countries in Southern Europe, this calculation looks completely different.
However, Austrians are not only doing poorly due to their relatively low debt. Austria is a country of traditional savings book savers.
“A savings book and a building savings contract represent an important financial foundation” says Uher.
Especially in times of extremely low interest rates one should however consider alternative investments for everything beyond that.
Traditionally Austrians invest only very little in stocks, equity funds or structured products, and as a result were only able to benefit to a very small extent from the positive trends in markets in recent years.
“It isn't the point of securities investments to push people into risk.
In order to safeguard one's wealth, more informed decisions are required as to how one wants to position oneself in a prolonged period of low interest rates”, Uher notes.
According to a recent survey, 22% of Austrians are at least planning to invest in securities in the coming 12 months.
The fact that some savers have already taken action is inter alia shown by the success of “wealth management for everyone”, Youinvest of Erste Bank und Sparkassen.
Since its issuance approximately 1.5 years ago, the actively managed umbrella fund Youinvest has placed a volume of nearly 800 million euro with retail customers in Austria.
This is equivalent to daily inflows of 2 to 3 million euro. The average performance of all three risk categories so far stands at more than 8% p.a.
Total securities volume has also slightly increased overall over the past five years and currently stands at EUR 111.4 bn. In the time period 2005 – 2009 it stood on average at EUR 95.6 bn. per year.
“Many Austrians are thus already taking advantage of the current global low interest rate environment in order to diversify their assets further”, says Uher.