Bank of Ireland to reduce savings rates on some accounts
Customers who are in the process of opening new 12- or 18-month fixed-term deposit accounts can still avail of the current rates if they open their account by the close of business on 4 June, the bank said.
It will take the interest earned for locking into the bank's Advantage 12 Month Fixed Term account to 1.74pc. The interest earned for locking into the Advantage 18 Month Fixed Term account will fall to 3.36pc (an annualised rate of 2.24pc).
Bank of Ireland said the rate reduction will not affect its other savings accounts, including SuperSaver, the bank's most popular choice for new regular savings, which continues to offer a 3pc AER (Annual Equivalent Rate) for 12 months.
Savers who are already locked into fixed-term deposit account will continue to earn interest at their original rate until the end of their term.
The move comes ahead of an expected European Central Bank rate cut in Thursday, which will be the eight in succession.
The ECB has lowered interest rates by a cumulative 1.75 percentage points in just under two years in a bid to calm inflation. In the same period Bank of Ireland, headed by CEO Myles O'Grady, has reduced its 12 and 18-month term deposit rates by a total of 0.75pc including the latest cuts.
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The Journal
18 hours ago
- The Journal
Why interest rate cuts are good news for Irish homeowners - but likely no help for buyers
BOY OH BOY, money's getting cheaper again! Well, borrowing it anyway. Earlier this week, the European Central Bank (ECB) cut its key interest rate by a quarter of a percentage point to 2%. As explained previously , the ECB rate is the interest banks receive for depositing money with the central bank. The important bit here is that when rates are increased, borrowing money becomes more expensive. This dampens consumer demand and reduces price inflation – that's why the ECB sharply increased rates in 2022. Now, the ECB wants to boost European spending. By cutting the rate, the ECB wants banks to lend more to consumers, fuelling economic activity. Like with every economic decision, there are winners and losers. Impact on owners and buyers In an Irish context, both mortgage holders and first time buyers have been portrayed as winners. The logic is that for people who already have a mortgage, they can get a better deal if they're refinancing (or among the group still on tracker mortgages ). And for first time buyers, the cut means their monthly repayment costs will be lower. Theoretically, this will allow them to get a bigger mortgage. Banks and mortgage brokers – anyone with an interest in selling mortgage loans, really – will say this 'increases borrowing power' and is a good thing for prospective buyers. But is this actually true? Well, at the risk of ruining the suspense too soon – probably not. The logic of the benefit holds true for existing mortgage holders. Those on fixed rates coming to the end of their term should be able to get a better deal. Others can shop around. Trackers obviously immediately benefit, as should variable holders. But it's not as simple for house buyers. Are there any benefits for buyers? You see, on paper, lowering mortgage rates for house buyers sounds great. Say you, our imaginary first time buyer, want to get a house that costs €350,000. You have a 10% deposit of €35,000, so you want to borrow €315,000. Let's say the term is a pretty standard 25 years. If your mortgage loan has a rate of 3.75%, which is around average in Ireland right now, you pay €1,620 per month. If the loan rate is lowered by just 0.25% to 3.5%, the monthly repayment is €1,577. A difference of €43 a month isn't exactly earth-shattering stuff. But over the course of a 25 year mortgage, it means you'd save about €13,000 – not bad. So maybe with a 3.5% rate, our imaginary buyer now feels they can stretch their budget a little more when they're house hunting. Maybe instead of paying €350,000, they're happy to go up to €360,000. Honestly, the effect of a single 0.25% rate cut is negligible. But it's not just this one – the ECB has slashed its main interest rate from 4% to 2% over the course of just a year. Going back to our hypothetical house hunter. The difference between 4% and 2% is over €300 per month – or about €100,000 over the lifetime of the mortgage. Of course, Irish banks were hesitant to increase mortgage costs in the face of ECB rate hikes, and will likely be slow again to lower them. But again, the cumulative impact is – borrowing costs are lower. So house hunters can afford to get a slightly better property, right? Advertisement Well, until we, of course, factor in that the rate cut applies to everyone . So all prospective housebuyers get pretty much the exact same boost in buying power. Will Lower Rates Solve the Housing Crisis? And, as you might have heard once or twice, Ireland has a shortage of new homes. We apparently should be building over 50,000 a year to meet demand. Completions came in at 30,000 in 2024, which was actually down slightly on 2023. House price inflation has also been on a steady upward march, rising by 7.5% in the 12 months to May . So with supply tight and the market already pretty hot, what will happen when you give all would-be house buyers the ability to borrow more money? Well, there's a decent chance prices will rise. That was the finding of a study published a few years ago looking at Australia's housing market, which is often compared to Ireland's. It found the reduction in interest rates after the financial crisis in 2008 'accounted for most of the subsequent boom in dwelling prices'. A 1% reduction in interest rates was estimated to be linked to a 2% property price rise over the next two years. A separate Australian study found the inflationary impact of interest rates tended to be even greater in areas where housing supply was tight. It suggested that lower interest rates 'increase housing wealth inequality, while higher rates do the opposite'. Although, it added the effects 'appear to be temporary'. This ties in with research previously carried out in Ireland by the Economic and Social Research Institute . It found that the real impact of interest rate is more on buyer behaviour. As rates start to come down, people expect they'll come down more. This makes buyers more confident, so they're more likely to spend money. The effect is similar either way. Lower rates = high prices. This largely cancels out the benefit of 'increased borrowing power' for buyers. Two other points worth noting quickly. One, the reverse of this is meant to be true. i.e, raising interest rates should lower house prices. The ECB hiked interest rates quickly between late 2022 and 2023. And while Irish house price inflation did significantly slow during that period, prices still rose , albeit at 'only' 2 – 4% for much of the year. Property price inflation then exploded in 2024, when consumers were told the rate hikes were over, and borrowing costs would eventually come down. The Central Bank also loosened Irish mortgage rules around this time . Again, this improved 'buyer affordability'. But when prices then surged by over 10% the following year, were buyers really any better off? The second point (and also the last one in this article). Lowering interest rates mean borrowers can saddle up with bigger debts. But Ireland doesn't do long term fixed rates. Mortgage rates are normally agreed for a maximum of five years, before home owners then have to renegotiate. But while interest rates change, how much you borrowed doesn't. Essentially – if you take on a mortgage of €325,000 instead of €315,000 at a 3.5% rate, you've stuck with that extra €10,000. When you have to refinance, that 3.5% rate could be 4%. But that extra €10,000 is still there. Of course, this can work the other way – interest rates can come down. But the ECB's current 2% rate is already pretty normal by historical standards . The only reason it was lowered below that in the first place was due to a generational recession after the 2008 financial crisis. Barring another one of those, chances are borrowing costs are more likely to rise than fall. What does all of this mean? Basically – don't believe the hype. Lower rates are good news for existing mortgage holders. But for prospective buyers currently house hunting – their 'increased borrowing power' will likely be cancelled out by further price rises. For them, the overall impact will probably be neutral at best. Readers like you are keeping these stories free for everyone... A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation. Learn More Support The Journal
RTÉ News
19 hours ago
- RTÉ News
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Agriland
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How farmers are going green with sustainability-linked loans
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He said that while the average size loan is €55,000, the loans range in size from €10,000 to €500,000. Farmers are using the loans for a range of purposes, from installing solar panels to adding additional slurry storage, with many taking advantage of the current Targeted Agricultural Modernisation Scheme (TAMS). Source: Bank of Ireland Byrnes said: 'For example, last year we supported a dairy farmer in Co. Limerick who was looking to upgrade his milking parlour, 'The farmer had expanded from 60 to 120 cows and the parlour was 30-years-old. He was a member of Kerry Evolve, was milk recording, and using protected urea along with multi species swards. 'We provided a €100,000 facility under Enviroflex over a seven-year term to this farmer. 'The farmer was delighted as the rate was very competitive. The farmer was already getting an additional sustainability payment from Kerry,' Byrnes said. By taking part in the Evolve scheme, the farmer reduced the carbon footprint of the farm over the past number of years. He is delighted to get an additional benefit from the Kerry Evolve scheme by availing of lower cost finance from Bank of Ireland. Source: Bank of Ireland Another example was where a dairy farmer supplying Kerry Dairy Ireland with land at both sides of a public road decided to build an underpass under the road. He was approved for a €60,000 loan through Enviroflex over a five-year period to help fund the underpass. According to Byrnes, the farmer is delighted he built the underpass, as his cows have benefitted by having to spend an hour less each day standing in the yard after milking . The farmer himself also has more peace of mind from a safety perspective, as the cows are no longer on the road and he has saved an hour each day herding the cows across the road. Byrnes also noted that he is seeing a lot of interest in farmers investing in solar panels. For example, a dairy farmer in Clare who had high electricity bills decided to install solar panels on his shed this year. He availed of a €20,000 loan over three years under Enviroflex through Kerry Dairy Ireland. 'He told me recently his electricity bills have reduced significantly this spring and he has hot water at all times which is vital for parlour hygiene. He reckons the solar panels will pay for themselves in less than three years,' Byrnes said. Benefits for farmers The agricultural development manager outlines that water quality and nutrient management are top of mind with many of the farmers in his area. He said a farmer in north Co. Cork built an additional slatted cubicle shed last year, had borrowed €120,000 over seven years from Bank of Ireland under Enviroflex, as a supplier to North Cork Creameries. 'This farmer is now making much better use of slurry by spreading it at appropriate times and given that slurry is an important nutrient, he needs to spread less artificial fertiliser which is saving him money' Byrne added. Byrnes explains that the risk of water pollution is also reduced for this farmer, who no longer has to worry about having to spread slurry because tanks are full, especially when weather conditions are not suitable. For farmers who are interested in availing of Enviroflex, Byrnes outlines that they must first talk to their co-op to ensure they are eligible. They can then apply online or enquire in their local Bank of Ireland branch. Currently, Enviroflex is available to over 95% of dairy farmers who participate in a co-op sustainability scheme, with 12 co-ops now supporting the rollout across the dairy sector. The loans have also recently been made available to tillage farmers via Irish Distillers. Lending criteria, terms and conditions apply. Over 18s only. Warning: The cost of your repayments may increase. Warning: If you do not meet the repayments on your credit facility agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future. Bank of Ireland is regulated by the Central Bank of Ireland.
