In July 2024, Ecuadorian fixed-term deposit interest rates peaked at 8.45%. However, as of January 2025, these rates have fallen to 7.19%. This prompts two key questions: Why are rates declining? And is investing in fixed-term deposits still a good idea?

What Caused the Drop in Interest Rates?

Throughout 2024, fixed-term deposits surged in popularity. By the end of the year:

- Banks held $23.42 billion in fixed-term deposits.

- Cooperatives managed $15.32 billion.

Both sectors experienced double-digit growth, driven by financial institutions raising interest rates to attract national savings amidst rising taxes and reduced access to external credit.

By mid-2024, interest rates reached their highest point at 8.45%. However, as 2025 begins, the story has changed. Banks now have plenty of liquidity. In fact, during 2024, for every $2 in deposits, they could only lend out $1. The economic downturn meant $3.38 billion less in loans were issued in the second half of 2024 compared to 2023.

As a result, banks are less eager to attract deposits in 2025, focusing instead on issuing more loans. Since 86.3% of bank income comes from lending, their priority is to lower credit interest rates by first reducing fixed-term deposit rates.

Are Fixed-Term Deposits Still a Good Investment?

Yes, they remain a secure and profitable option, even at the lower rate of 7.19%.

This rate still outpaces inflation, which is projected at 2.2% for 2025. For example:

- Investment: $5,000 at 7.19% for one year.

- Gross Return:

$5,000 × 0.0719 = $359.50

After accounting for inflation:

- Real Rate of Return:

7.19% − 2.2% = 4.99%

- Net Return:

$5,000 × 0.0499 = $249.50

By investing, you earn $249.50 in real terms, compared to losing purchasing power by keeping $5,000 in cash. Without interest, inflation would reduce its value to $4,890.

In short, while rates have dropped, fixed-term deposits still offer a safe way to grow and protect your money in 2025.

See our guide How to Invest in Ecuadorian Certificates of Deposits (CDs) for information about investing in CDs in Ecuador. We've also created a tool to compare CD interest rates: Compare CDs.

Source: La Hora.

The newspaper El Mercurio has published an article reporting that Cuenca has become a refuge city for people from the coastal region of Ecuador. Below a summary: 

• These individuals seek to escape the violence on the coast and come to Cuenca to live and invest in residential and commercial real estate.

• According to lawyer and real estate agent Pablo Rodríguez, the following areas in Cuenca are popular for living: Misicata, El Ejido, Puertas del Sol, Ordóñez Lasso, Yanuncay, and Challuabamba. Other desirable destinations include Paute, Gualaceo, and Santa Isabel (Yanuncay Valley).

• Investors in commercial properties seek locations near the Alejandro Serrano Aguilar stadium in El Vergel. For workshops and factories, they are exploring opportunities in the province of Cañar.

• Rodríguez notes that Ecuadorian migrants in the USA and Europe, along with their family members, are purchasing fewer properties. He believes these Ecuadorians find investing in Ecuador too risky.

• Luis Tobar, an economist and professor at the Salesian Polytechnic University (UPS), states that the increase in property purchases by people arriving from other cities is one of the factors contributing to rising rental prices in Cuenca.

In June 2024, Ecuadorian financial institutions such as banks and credit-unions offered a record-breaking fixed currency deposit interest rate of 8.44%, according to the monthly reports published by the Central Bank of Ecuador. This is the highest return seen in the last fifteen years, at least since January 2008. 

Interest rates

The passive interest rate is what financial institutions pay for holding a deposit over a specified period. The Central Bank of Ecuador publishes the annual reference passive interest rates based on the duration of the deposit.  For instance, the reference passive rate in June 2010 was 4.4%, which has risen by 4.04 percentage points to 8.44% in June 2024. Between June 2023 and June 2024 alone, the rate increased from 7.03% to 8.44%.

High inflation and rising interest rates abroad have pressured local banks and credit-unions to increase their rates to retain deposits. The 8.44% rate is an average; the actual return depends on each financial institution and the deposit term.

Interest rates for fixed deposits by term

Term - Annual Yield

30-60 days - 7.57%

61-90 days - 8.38%

91-120 days - 7.88%

121-180 days - 8.59%

181-360 days - 8.48%

361 days and more - 9.64%

Source: Central Bank of Ecuador (June 2024)

To compare the annual yields between banks and credit-unions for currency deposits you can use our own tool: Compare CDs.

Total currency deposit holdings in Ecuador

As of April 2024, private bank (fixed) currency deposits in Ecuador amounted to $20.793 billion. Adding $14.723 billion from credit-unions and mutualists, the total reaches $35.517 billion.

The 181 to 360 days term is the most popular, with $10.478 billion frozen in banks and credit-unions.

In April 2024, 386,580 private bank clients had currency deposits, according to Datalab of the Association of Banks of Ecuador (Asobanca). The Superintendence of the Popular and Solidarity Economy reported 793,987 cooperative and mutualist clients with currency deposits as of March 2024.

Source: El Universo.