Cash-poor consumers stop saving amid interest rate declines
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A NEW survey shows that consumers are saving less as low interest rates and a lack of spare funds prompts people to put less aside.
The results of the Nationwide UK (Ireland) survey were released as it emerged that lenders were again cutting their savings rates.
The savings index for June 2010 declined by five points, the sixth month in a row that the index has fallen. This means people are attaching less importance to savings, either because they have not got the funds or because they feel there is less of a need to put money aside.
A majority of people also feel they are saving less than they think they should. There was also an increase in the number of people who believe that it is a bad time to save.
Managing director of Nationwide UK (Ireland) Brendan Synnott said: "In broad terms, there remains a need for Irish consumers to increase savings in order to rebalance the economy. So far, the rise in savings has not benefited deposit accounts, as higher savings have mostly taken the form of debt repayment."
Mr Synnott said the low interest rate environment has contributed to making debt repayment more attractive than accumulating deposits.
However, over time deposits should benefit from the higher propensity to save due to the recession. He said there was already signs of this as the proportion of Irish consumers reporting that they save regularly has increased to 45pc in June from 38pc in May.
Pathway
Meanwhile, Ulster Bank is to reduce the interest rate it pays on its Pathway account from 3.6pc to 3.1pc from August 2. These rates apply for the first year on amounts of more than €15,000.
The gross rate on the eSavings account, for amounts between €15,000 and €1m, will reduce from 2.98pc to 2.25pc.
EBS has launched a new seven-month fixed rate account paying 3.53pc over that period. Over a year, this account pays 3.35pc. A minimum of €20,000 has to be put into this new account.
- Charlie Weston Personal Finance Editor
Irish Independent
