Your Portuguese savings certificates are about to stop following Euribor upwards
The Series F base rate tracks three-month Euribor, but the IGCP term sheet caps it at 2.5%. Three-month Euribor traded at 2.507% on 22 August, which puts it above the ceiling for the first time.
Portugal’s most popular savings product has a brake written into its own term sheet. Euribor has just reached it.
Nobody sits in a room deciding the base rate on Series F savings certificates. It is the average of three-month Euribor over the previous ten business days, rounded to three decimal places. But the same IGCP term sheet that sets out that formula adds a line that rarely makes the coverage: the base rate may not be higher than 2.50% or lower than 0%.
August’s base rate came in at 2.474%, a few thousandths off the limit. Meanwhile three-month Euribor touched 2.500% on 18 August and was quoted at 2.507% on the 22nd. It has cleared the ceiling.
What changes from here
September’s base rate is set on the penultimate business day of August, which this year falls on the 28th. Whatever the ten-day average turns out to be, it cannot print above 2.50%. If Euribor keeps climbing through September and October, the certificates’ number stays where it is.
That is where this gets lopsided. The same family of rates that has stopped paying you more is still making mortgages dearer. Six-month Euribor hit a 21-month high days ago, and it has no ceiling at all. Borrowers absorb the whole rise. Savers get up to 2.50% and not a basis point beyond.
What that works out at
The cap applies to the base rate, not to what you actually earn. On top of the base sits a retention premium that grows with the age of the subscription: 0.25 percentage points from the second year to the fifth, 0.50 from the sixth to the ninth, a full point in years ten and eleven, 1.50 in years twelve and thirteen, and 1.75 in the last two.
Run the numbers with the base at the ceiling. A subscription in its tenth year pays 3.50%. One in its third year pays 2.75%. One opened this week pays 2.50% and nothing more, because the premium only starts in year two. Over a 15-year product, how long you have held it matters considerably more than when you bought in. Worth knowing too: the base rate applied to each subscription is the one in force at the start of that subscription’s quarter, not the one you see quoted in the month you check your statement.
Is it still worth subscribing
It depends what you are measuring it against. Against a term deposit, the certificates still carry a state capital guarantee, allow redemption from the first interest payment onwards, and cap out at 250,000 units per savings account. Against the possibility of Euribor climbing further, the ceiling means the upside is now spent, and that is this week’s news. Two months ago we wrote that savings were paying again. The update is that, on certificates, they have stopped paying more.
Image: Peter Broster / Wikimedia Commons (CC BY 2.0)
