Friday 17 January 2020

Banks here charge lowest interest rates in eurozone

Laura Noonan

IRISH banks are making long-term loans to businesses and homeowners at some of the lowest interest rates in the eurozone -- while paying out some of the highest rates for deposits.

The challenging trading conditions for Irish banks are referenced in the Central Bank of Ireland's (CBI) latest 'Retail Interest Rate Statistics' publication, and detailed more fully in the ECB's statistics warehouse.

But the data also shows that both businesses and individuals in Ireland pay some of the highest interest rates in Europe on ultra short-term debt -- like credit cards and overdrafts.

In its publication, the CBI noted that Ireland's 'non-financial corporations' are paying an average of 3.49pc for their borrowings -- against the eurozone average of 3.81pc.

The ECB data shows pricing of longer-term loans (for more than five years) is particularly competitive, with companies here paying an average of 3.42pc in February.

The only lower rates were in Austria (3.09pc); Finland (2.58pc); Estonia (3.32pc); and Italy (3.34pc). Ireland's rates are also well below other 'periphery' countries like Greece (5.27pc) and Portugal (4.2pc).

Irish mortgages are the fourth cheapest in the eurozone, with our homeowners charged an average of 2.98pc a year against the eurozone average of 3.86pc.


The only countries with lower rates than Ireland are fellow programme country Portugal (2.63pc), Finland (2.42pc) and Luxembourg (2.16pc).

The healthier Western European countries generally have higher rates than Ireland. The average rate in Germany is 4.47pc, in Belgium it's 5.14pc, and in France it's 3.94pc.

Banks typically try to 'match' the pricing of longer-term loans with longer term deposits -- but Ireland's banks are charging low rates for longer-term loans, while paying high rates for term deposits.

Irish companies get an average of 3.14pc for their 'term' deposits -- about 50pc higher than the eurozone average of 2.08pc.

Data from the ECB showed Irish households/consumers enjoy the fourth-highest interest rates for term deposits, with our savers getting an average rate of 3.45pc -- against a eurozone average rate of 2.79pc.

The only countries where rates are higher are Greece (4.36pc), Cyprus (4.17pc) and the Netherlands (3.61pc). Ireland's term rates are up from 2.8pc in February 2011, when our rates were only the sixth highest.

The data shows Ireland's rates have been falling over the last year, despite the banks' claims about persistently 'expensive' deposits.

The average rate paid for new Irish term deposits from households was 2.43pc in February -- only the ninth highest in the eurozone and below the rates offered in Portugal (3.74pc), Italy (3.34pc) and the Netherlands (3.18pc).

Irish Independent

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