Deposit interest rates will continue to fall. What do people who want to grow their money choose?
After a year of offering interest rates unseen in a decade and surpassing inflation, bank deposits are gradually returning to lower yields. Having experienced the value of passive income, people are now actively seeking where to invest the funds they had kept in deposits.
In recent years, even the major Lithuanian banks have been offering interest rates on deposits that have not been seen for decades, ranging from 3-4%. However, since the beginning of this year, the return on deposits has started to decline. With the European Central Bank cutting base rates, deposit yields continue to shrink.
Greta Zarembiene, partner at Röntgen, Lithuania's second-largest real estate crowdfunding platform, notes that some Lithuanians, having experienced the benefits of passive income, are no longer willing to keep their savings in deposits, and are looking for another profitable and less risky investment.
"I consider deposits a savings tool, not an investment, but the recent years of higher interest rates after a long break allowed people to experience the value created by money. If a family kept a €30,000 deposit in a bank, it earned them about €1,000 in a year, which is a noticeable sum to contribute to holidays or pay for additional activities for their children. As deposit interest rates decrease, we sense that some residents are beginning to look for ways to employ their money for higher returns with conservative risk," G. Zarembiene said in a podcast.
According to her, one of the rapidly growing alternatives to deposits, investment properties, or other instruments is crowdfunding platforms with real estate collateral. Last year, the Lithuanian crowdfunding market grew by 43% to €230 million. Röntgen grew more than double to €55.8 million and paid out over €5 million in earned interest to its investors since last year.
"We have seen successful examples where, after a deposit term ended, families discussed and decided not to keep their money in a deposit with 3% annual interest, so they employed those funds with us, where they will now earn around 10%, and the real estate will be pledged in their favor," said G. Zarembiene. According to her, the platform currently offers investors an 8-12% annual return and, most importantly, the primary pledge of valuable real estate.
"Crowdfunding is a well-known form of lending with collateral. Previously, this tool was only accessible to a narrow circle of professionals or large capital owners. New technologies now allow anyone to invest, starting from €100, and the platform ensures that more valuable real estate with primary collateral is pledged in favor of investors. This means that if necessary, the loan can be recovered from the pledged property. Investors invest for a short period, usually a year, and receive a fixed attractive return. In other words, our investors become banks – lending with collateral," G. Zarembiene claimed.
She noted that people of various age groups and professions are increasingly investing on the platform, including large private investors, Lithuanians living abroad, and even seniors looking for alternatives to deposits. On the other hand, Röntgen is also popular among financial professionals and large capital managers who trust the platform's conservative project selection, including banks that invest on equal terms with retail investors.
"We've had a case where one of our investors, with a relatively large portfolio, openly shared with us that they decided to place part of their investments in a deposit at a specific bank for nearly 4% annual interest. Three weeks later, the same bank invested with us at 11% annual interest. So, by entrusting their money, the person lost part of the profit," said G. Zarembiene.
"Crowdfunding is simple in every way: fixed returns that currently exceed the long-term returns in the stock market or from renting an apartment. The asset pledged for the loan is always of significantly higher value, ensuring debt repayment in case of difficulties. We select the investment projects very carefully, commission opinions from lawyers, property appraisers, and other experts, and only pledge insured and liquid real estate. The investment process itself is also simple. Finally, the crowdfunding market has been overseen by the Bank of Lithuania for almost a decade," G. Zarembiene commented.
Investing Abroad
She also observed that recently Lithuanian investors have shown interest in opportunities abroad, as well as in actively advertised bonds. While these are not necessarily poor alternatives, it is important to thoroughly examine all the terms before investing.
"There is a true renaissance in the bond market, but it is important for residents to ensure what assets are pledged in their favor. In the Lithuanian crowdfunding market, there is an unwritten rule regarding primary real estate pledges, whereas in bond offerings, pledges are often not as strong. Similar risks exist when investing in foreign platforms: returns may be similar to those in Lithuania, but primary real estate pledges are rare. We see that after exploring opportunities abroad, investors return and invest in Lithuania," Zarembiene affirmed.
For those seeking alternatives to deposits, she recommends trying crowdfunding - you can start with just €100, and the experience alone can bring valuable insights and understanding. "As base interest rates continue to decline, private debt will also become cheaper, so now is the best time to invest and lock in higher returns," Zarembiene stated.
Deposit interest rates will continue to fall. What do people who want to grow their money choose?
After a year of offering interest rates unseen in a decade and surpassing inflation, bank deposits are gradually returning to lower yields. Having experienced the value of passive income, people are now actively seeking where to invest the funds they had kept in deposits.
In recent years, even the major Lithuanian banks have been offering interest rates on deposits that have not been seen for decades, ranging from 3-4%. However, since the beginning of this year, the return on deposits has started to decline. With the European Central Bank cutting base rates, deposit yields continue to shrink.
Greta Zarembiene, partner at Röntgen, Lithuania's second-largest real estate crowdfunding platform, notes that some Lithuanians, having experienced the benefits of passive income, are no longer willing to keep their savings in deposits, and are looking for another profitable and less risky investment.
"I consider deposits a savings tool, not an investment, but the recent years of higher interest rates after a long break allowed people to experience the value created by money. If a family kept a €30,000 deposit in a bank, it earned them about €1,000 in a year, which is a noticeable sum to contribute to holidays or pay for additional activities for their children. As deposit interest rates decrease, we sense that some residents are beginning to look for ways to employ their money for higher returns with conservative risk," G. Zarembiene said in a podcast.
According to her, one of the rapidly growing alternatives to deposits, investment properties, or other instruments is crowdfunding platforms with real estate collateral. Last year, the Lithuanian crowdfunding market grew by 43% to €230 million. Röntgen grew more than double to €55.8 million and paid out over €5 million in earned interest to its investors since last year.
"We have seen successful examples where, after a deposit term ended, families discussed and decided not to keep their money in a deposit with 3% annual interest, so they employed those funds with us, where they will now earn around 10%, and the real estate will be pledged in their favor," said G. Zarembiene. According to her, the platform currently offers investors an 8-12% annual return and, most importantly, the primary pledge of valuable real estate.
"Crowdfunding is a well-known form of lending with collateral. Previously, this tool was only accessible to a narrow circle of professionals or large capital owners. New technologies now allow anyone to invest, starting from €100, and the platform ensures that more valuable real estate with primary collateral is pledged in favor of investors. This means that if necessary, the loan can be recovered from the pledged property. Investors invest for a short period, usually a year, and receive a fixed attractive return. In other words, our investors become banks – lending with collateral," G. Zarembiene claimed.
She noted that people of various age groups and professions are increasingly investing on the platform, including large private investors, Lithuanians living abroad, and even seniors looking for alternatives to deposits. On the other hand, Röntgen is also popular among financial professionals and large capital managers who trust the platform's conservative project selection, including banks that invest on equal terms with retail investors.
"We've had a case where one of our investors, with a relatively large portfolio, openly shared with us that they decided to place part of their investments in a deposit at a specific bank for nearly 4% annual interest. Three weeks later, the same bank invested with us at 11% annual interest. So, by entrusting their money, the person lost part of the profit," said G. Zarembiene.
"Crowdfunding is simple in every way: fixed returns that currently exceed the long-term returns in the stock market or from renting an apartment. The asset pledged for the loan is always of significantly higher value, ensuring debt repayment in case of difficulties. We select the investment projects very carefully, commission opinions from lawyers, property appraisers, and other experts, and only pledge insured and liquid real estate. The investment process itself is also simple. Finally, the crowdfunding market has been overseen by the Bank of Lithuania for almost a decade," G. Zarembiene commented.
Investing Abroad
She also observed that recently Lithuanian investors have shown interest in opportunities abroad, as well as in actively advertised bonds. While these are not necessarily poor alternatives, it is important to thoroughly examine all the terms before investing.
"There is a true renaissance in the bond market, but it is important for residents to ensure what assets are pledged in their favor. In the Lithuanian crowdfunding market, there is an unwritten rule regarding primary real estate pledges, whereas in bond offerings, pledges are often not as strong. Similar risks exist when investing in foreign platforms: returns may be similar to those in Lithuania, but primary real estate pledges are rare. We see that after exploring opportunities abroad, investors return and invest in Lithuania," Zarembiene affirmed.
For those seeking alternatives to deposits, she recommends trying crowdfunding - you can start with just €100, and the experience alone can bring valuable insights and understanding. "As base interest rates continue to decline, private debt will also become cheaper, so now is the best time to invest and lock in higher returns," Zarembiene stated.
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"Trečia diena" UAB, which operates the Röntgen platform, is a licensed crowdfunding platform. The platform is governed by the EU Crowdfunding Regulation and is supervised by the Bank of Lithuania in accordance with the law.