3 days ago
Irish fixed-term savings rates fall faster than interest offers on mortgages
Irish banks cut fixed-term savings rates for households at a faster pace than
mortgages
in the year to April as
European Central Bank (ECB)
rates declined.
The average annual
interest rate
offered to households putting money in a fixed-term saving account fell by 0.7 percentage points to 1.95 per cent, year-on-year, in April, according to new Central Bank figures.
In the same period, new lending rates for home purchases declined by a more modest 0.52 of a point to 3.72 per cent. Still, the average cost was the fifth highest across the 19 euro zone states and 0.38 of a point higher than the average across the single-currency area.
Money in current and on-demand deposit accounts was earning just 0.13 per cent on average, unchanged on the year, and less than half the 0.29 per cent average enjoyed by consumers across the wider euro zone.
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Some 85 per cent of the €166 billion Irish households have on deposit falls into this category, with even the banks surprised in recent years by how few people opted to move money into fixed-term deposits where the three domestic lenders have been offering rates of as much as 3 per cent.
Irish banks were slower than euro zone peers to pass on official rate increases to both savers and mortage holders as the ECB hiked its deposit rate from minus 0.5 per cent to 4 per cent over 15 months to September 2022. This resulted in households with large savings essentially subsidising mortgage holders as they grappled with the cost-of-living crisis.
The ECB deposit rate had fallen back to 2.25 per cent by the end of April and was cut again last week to 2 per cent.
'Ireland is an outlier in holding very high levels of savings in low-yielding accounts, and much of that is to do with inequitable tax policies that disincentivise savers from moving to better-yielding alternatives,' said Rachel McGovern, deputy chief executive of Brokers Ireland, the lobby group for financial and insurance brokers.
The deposit interest retention tax rate currently stands at 33 per cent. Elsewhere, Irish retail investors who put their money into a fund, for example, must pay a 41 per cent tax when they take their money out of the fund, irrespective of what income tax bracket they are in, or after eight years – whichever comes first.
