Savers to lose out as Anglo set for rates cut
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SAVERS are likely to be the big losers from the effective nationalisation of Anglo Irish Bank.
Anglo Irish Bank offers the highest savings rates in the market. It has the highest demand deposit rate at 5.5pc, the highest rate for regular or monthly savers at 8pc and the highest one-year fixed deposit rate at 6pc.
But there were indications last night that these rates are likely to fall in the new year.
Personal finance experts advised consumers to lock in to the high-fix rates on offer from Anglo Irish, as the bank is almost certain to reduce its rates in the next few weeks.
Other banks, particularly foreign-owned ones operating in this market, are likely to demand that Anglo Irish does not use the state injection of €1.5bn on its balance sheet to compete unfairly in the market.
Rival banks are likely to argue that Anglo would not be able to continue to offer market-leading interest rates, if it was not for the Government's cash bailout.
Financial adviser Karl Deeter said the fact that Anglo Irish Bank would have to pay the Government €150m every year in return for the state cash injection, would mean it would have to reduce its high savings rates.
"You can't pay the State 10pc (the interest bill for the State preference shares), unless you are making enough to cover those positions. To continue to offer such high deposit rates, if Anglo Irish is not profitable, would be an error in light of the state-sponsored bailout," Mr Deeter said.
He added: "Any bank with an ounce of sense won't be required to woo depositors once they have state cash in the coffers. This means that the state cash injection will actually hurt Joe Public."
Restricted
Other market observers pointed out that when the British government took over Northern Rock, it told the bank to restrict its high interest rate offerings.
This was because there was a fear the state protection for Northern Rock would make it highly attractive for savers and distort the market.
Now there is a fear that a partly nationalised Anglo Irish bank could distort the market here.
The director of comparison website Irishdeposits.ie, Harry Slowey, said savings rates would fall in the new year when the European Central Bank is expected to cut its rates again.
Meanwhile, a new survey shows that more than three quarters (76pc) of adults said they were putting money aside every month because of the recession. This is up from September, when 71pc of adults said they were saving, according to a survey commissioned by Standard Life.
The average amount saved has decreased from €316 to €275 a month, as families find their household budgets squeezed by the slump.
- Charlie Weston Personal Finance Editor
