Investec move to drop rates takes heat out of deposit war
THE deposit rates war cooled this week after Investec, which has been paying the highest interest for 12-month deposits at 3.6pc, said it would drop the rate to 3pc tomorrow.
Other banks will follow with cuts in deposit rates, Investec's Aidan Ryan maintained.
Investec introduced the 3.6pc rate in February and saw a surge of money put on deposit with it.
Mr Ryan said the bank had decided to cut the rate because of the continuing high costs of funds for banks in the wholesale markets, and he predicted that rates were set to fall across the market.
Bankers, including Allied Irish Banks' boss Colm Doherty, have complained that the market is out of synch as banks are paying more for deposits than they can get in interest from loans.
This is because of a shortage of funds in the wholesale money markets.
Investec, which takes deposits online and through the post, is leaving its nine-month, six-month and three-month fixed rates at 3pc. It pays 2pc for one-month notice accounts.
The move to reduce the Investec rate will leave state-owned Anglo Irish Bank with the best term deposit rate.
Its one-year rate is 3.5pc, if there are no withdrawals during the year. Otherwise, the rate falls to 1pc.
Irish Nationwide pays 3.5pc for one-year deposits, with a minimum deposit of €20,000.
Derek Keogh head of retail sales at Anglo Irish said: "Every bank is reviewing its rates on a daily basis.
"If consumers see a good rate they should grab it."
British-owned Northern Rock said yesterday it would offer a 2.75pc fixed rate until June 2011 on balances over €1,000. Interest can be paid annually or monthly.
Northern Rock, which suffered a run on deposits in September 2007 and was subsequently nationalised by the UK government, will no longer have a full guarantee for its deposits from the British exchequer. The bank has a large number of Irish savers.
From May 24 next, their deposits will effectively be covered for up to €100,000 under a combination of the British and the Irish deposit-guarantee schemes.
Existing variable-rate deposit accounts will continue to be guaranteed until May.