Even after the interest rate cut: which bank will still give you a deposit yielding 6% per year?

Last week, we reported on indications received from mortgage consultants regarding pressure in the banking system and attempts to increase the interest rate "spreads" on mortgages, with the goal of making them more expensive or at least preventing their rapid reduction. The July data on interest rates on deposits show that as far as cutting the interest that banks pay on annual deposits is concerned, they are actually working efficiently.

As every month, the Bank of Israel publishes data on the interest rates that banks pay on deposits, alongside the interest rates they charge on loans. The July data illustrate the speed at which the Bank of Israel's recent interest rate cuts are rolling over to savers.

The average fixed interest rate that banks paid to those who deposited their money for a period of between six months and a year fell in July to 3.59%, compared to 3.7% in the previous month and 3.94% in April. This is a rapid erosion, while there is also a huge gap between the banks.

According to the data, someone who locks their money for a year in a deposit at One Zero can receive an interest rate of 6%, while at Bank Massad the interest rate on a deposit in this category stands at only 2.9%. The two largest banks, Leumi and Hapoalim, offer an interest rate of 3.74% and 3.72% respectively on deposits for a period of between six months and a year. Discount, Mizrahi-Tefahot, and First International Bank pay an average interest rate of 3.48%, 3.53%, and 3.45% respectively.

And what about mortgage tracks?

The painful point continues to be the banks' bonanza. The balances of private customers' current accounts stood in June - the last month for which data exists - at 233 billion shekels. This is a huge amount on which the banking system pays zero interest, so the public does not benefit from the more attractive interest rates offered by deposits. In July, the volume of deposits made by households totaled about 37.4 billion shekels.

As mentioned, while the interest rate on deposits is falling rapidly, the interest rate on mortgages is not being updated at the same pace. Data we published last week shows that in recent months, banks have increased the interest rate spreads they charge on some mortgage tracks, thereby offsetting part of the decline in the economy's interest rate. Thus, in tracks with a variable interest rate linked to government bond yields, offers were recently received with a spread of 1%-1.3%, compared to spreads of about 0.7% in the past. In these tracks, banks have more room in setting the interest rate, and the result is that the decline in the interest rate on mortgages is more moderate.

However, Bank of Israel data published today show that in consumer loans the trend is different. The interest rate on these loans is based on the prime rate, and therefore is directly affected by the Bank of Israel's interest rate changes - and accordingly, it is in decline. This is despite the fact that consumer loans are still significantly more expensive than mortgages, and the interest rate on them is almost twice as high.

For consumer loans linked to the prime rate granted in July, the average interest rate stood at 8.23%. The two largest banks, Hapoalim and Leumi, provided loans at average interest rates of 8.4% and 7.56% respectively. Here too, there are significant gaps between the banks, and therefore price comparison is of great importance: Bank of Jerusalem provides loans at an average interest rate of 10.28%, while the digital bank One Zero provides them at an average interest rate of only 6.42%.