Livret A, PEL, life insurance … What investments are being driven by the rise in interest rates?

The European Central Bank will raise its key rates in July. And by extension, several savings products could see their rates rise in the coming months. Explanations.

It is the end of an era. For years, the European Central Bank (ECB) has continuously injected money to support the European economy. But the situation is changing. In May, inflation in Europe reached 8.1%, the highest level since the creation of the euro area. Result? To stem the rise in prices, the ECB no longer has a choice. On Thursday 9 June, at the Board of Governors, the institution announced the end of its asset purchase program, as well as a re-evaluation of 25 basis points of its key tariffs, in effect since July 1 next.

save on taxes and earn up to € 500 Thank you our life insurance comparison

Gradual increase

The increase remains measured for the moment. On the one hand, to avoid slowing down the economic recovery, already weakened by the loss of household purchasing power. And on the other, to avoid embarrassing heavily indebted states, such as Spain, Italy or, to a lesser extent, France.

Given the level of inflation, key rates should be pretty close 5 Where is it 6%, estimates the economist Philippe Crevel, director of the Cercle de l’pargne. However, even after the July hike, ECB rates will only be -0.25% for the deposit rate, 0.25% for the refinancing rate, e 0.5% for the marginal lending facility. This change in monetary policy marks a turning point for the European economy. This is the end of the low interest rate environment that has reigned for several years, continues Philippe Crevel. Especially since the president of the ECB, Christine Lagarde, has already warned him further rate hikes they are expected from September.

The first consequences are already visible: according to the Banque de France, mortgage rates have passed 1.10% in December more than 1.25% in May. But if rising rates are bad news for certain asset classes, such as stocks, cryptocurrencies and real estate, traditional savings products could be felt.

Stock market: prices are in free fall, is it time to sell?

1. Booklet A

The top winners of the key rate hike, the Livret A and its false sibling, the Livret de développement durabile et solidire (LDDS), are expected to earn more from 1 August. The fee for these booklets had already been re-evaluated last February, going from 0.5 1%. But a further increase seems likely.

Every 6 months, the Banque de France calculates the theoretical rate for Livret A savings accounts based on the arithmetic meaning between the change in annual inflation, excluding tobacco, in the last six months, and the STR, an index based on short-term interest rates on loans contracted by eurozone banks in euros.

However, if the ECB raises rates, commercial banks will have to pass the increase on to their borrowing rates and the STR will rise, summarizes Philippe Crevel. Conclusion: In a previous article MoneyVox estimated that the theoretical rate of the Livret A would reach 2% this summer.

The governor of the Banque de France, Franois Villeroy de Galhau, also confirmed that the Livret A rate will be increased on 1 August. However, he did not specify the amount of the increase. Because it is the government that will have the last word. The Livret A rate is set on a discretionary basis, remembers Philippe Crevel.

2. The youth booklet

Livret Jeune should also benefit from the key rate hike. And for good reason: its rate, freely set by each bank, must be at least equal to that of the Livret A. If the Livret A rate is revalued following the rise in key rates, the minimum rate of the Livret Jeune will therefore be automatically increase. On average, the remuneration of this booklet exceeds that of the Livret A di 0.50 points 1 point. HSBC bank, for example, offers a Livret Jeune rmunr 2%.

3. The popular savings account

The Livret d’epargne populaire (LEP) rate corresponds to the higher figure between the Livret A rate increased by 0.5 points and the half-yearly average of inflation without tobacco on an annual basis. However, with inflation 4.8% in April then 5.2% in May it is undoubtedly this second figure that will be used to calculate the theoretical rate for the LEP.

Result? The LEP rate could rise on 1 August 4.5%its highest level since then 14 years. What can accelerate the adoption of this savings product, often overlooked by savers. near 50% The French can benefit from the LEP. Still, his detention rate is lonely 13.3%according to the 2020 report of the Observatory on regulated savings of the Banque de France.

Popular Savings Book: 3 Uplifting Figures on LEP

4. Bank books

Bank books are not a regulated savings product. Banks are therefore free to choose their own rate of return. In April, the average yield of these brochures was 0.09%, according to data from the Banque de France. And after taking into account the tax, these booklets only entered 0.063%. A historically low level.

However, even then, the rise in key rates could shake things up. The remuneration of the bank books is directly linked to the tariffs of the money marketsconfirms Philippe Crevel, for whom the rates of these booklets should increase from the next quarter.

Especially since, despite their family wages, the outstanding amount of bank books continues to grow. At the end of March it reached almost 220 billion euros, or 5 billion more than a year ago. This is a very competitive market, completes Philippe Crevel. And some brands may be tempted to do so raise their rate quickly to gain market share.

Despite inflation and Livret A, bank books are not taking off

Rates on restricted accounts are on the rise

In the wake of the banking books, restricted accounts are also benefiting from the rise in future rates. These savings accounts offer a more attractive remuneration, subject to the blocking of money for a certain period of time, which generally varies from 3 months to 5 years. The Distingo Term Account offered by PSA Banque now offers a guaranteed gross annual return of up to 1%. It now also reaches 1.70% on Klarna’s 4-year account.

See our selection of the best forward accounts

5. The ELP

Since 2011, the Banque de France has been able to revise the rate of the Housing Savings Plan (PEL) annually. For its calculation, the institution relies on the risk-free rates of the European money market, known as exchange, possibility 2, 5 and 10 years. In detail, the integrated formula 70% the 5-year swap rate e 30% the 10-year rate minus the 2-year rate.

On paper, the rise in key interest rates should therefore lead to a revaluation of the yields provided by the PEL (1% before tax since 2016). In this case, the new tariff must be published no later than December 5, 2022. However, even in this case, the government may decide to derogate from the rule.

Peculiarity of the ELP: the remuneration rate is set at the beginning of the contract and does not change thereafter. In other words, only new subscriptions will be affected in the event of a revaluation of the PEL rate. What could revive this investment, the ownership rate of which has continued to decline since 2016 to achieve 19% in 2020.

How much do your investments really earn you at 5% inflation?

6. Funds in euro for life insurance

The average return on euro funds was 3% in 2011. But after 10 years of decline, it just is 1.30%. Today, the slow fall in euro funds could be coming to an end. Because the savings deposited on the euro funds are then invested equivalent Treasury securities (OAT), ie in public debt securities, explains Philippe Crevel. However, OAT rates are partly related to ECB rates.

The anticipation of a key rate hike is already having its first effects: on May 15, the 10-year OAT rate was 1.5%. A month later, she is progressing 2.33%. According to Philippe Crevel, the rise in key rates will only reinforce the upward movement already observed in OATs since the beginning of the year.

However, you will have to wait a little longer before you notice a real difference in the returns of your euro funds. Much of these funds are already invested in old bonds. There is therefore a strong inertiaup and down, continues the economist.

Of new euro funds it could, however, see the light in an attempt to capture the current good remuneration levels of OATs, and offer higher yields. In response, traditional insurers could, for their part, draw on the reserves of the euro funds to prevent the gap with these new funds from becoming too large.

Life Insurance: Comparison of Offers

Leave a Comment