KBC lures savers with offer of 3.8pc upfront
A BANK yesterday bucked the trend of falling deposit rates with a new account that is likely to put pressure on other deposit-takers.
Savers have been suffering because of banks and building societies cutting interest rates for the past few months.
Now KBC Bank is expected to hoover up millions of euro in deposits after launching a new account that pays 3.8pc with the option of taking the interest upfront.
The Belgian-owed bank requires funds to be left on deposit for a year. Savers have the option of getting their interest at the end of the year, or 16 days after opening the account.
The new account will compete directly with Permanent TSB which pays interest upfront on one of its products, Interest First.
The rate on this account is 2pc for amounts between €5,000 and €9,999 and 3.5pc for amounts of more than €10,000.
Most banks are cutting interest rates as they struggle to return to profitability, but they still have a huge appetite for savers' cash to fund their day-to-day operations.
There are more than a dozen deposit-takers in the market, including British building societies Nationwide (UK) Ireland and Leeds. Interest rates had gone down at all of them over the past few months, adviser Marc Westlake of Goldcore said.
He warned those with cash to stash not to get sucked into putting money into an account with an attractive headline rate and then failing to move it to another account in the same bank or another when the rate inevitably dropped.
Inertia meant people left money in accounts even after the rates had dropped, said Mr Westlake. Accounts closed to new business tend to have low rates, while the bank will continue to advertise an attractive headline rate.
Meanwhile, overall deposits at Irish banks continued to grow last month, according to figures published by the Department of Finance. Deposits have increased by €14.3bn to €154.4bn since reaching a low-point of about €140bn in July 2011.
The department said: "This demonstrates depositor confidence in the strength of the banking system following its successful recapitalisation last year."
The data shows that deposits at the banks covered by the government guarantee scheme rose by €1.5bn or 1pc month-on-month to €154.4bn. However, the department admitted the weakness of the euro against sterling had boosted the euro value of deposits Irish banks had in Britain.