SAVERS stuffed almost €4bn into banks and credit unions in the last three months of last year despite massive pressure on household incomes from surging prices.
The Central Statistics Office found that the savings rate was 20pc as Irish people with spare funds continued the higher rate of saving begun during the pandemic. Not all households are able to save.
The savings frenzy is in spite of banks only passing on a fraction of the five recent European Central Bank rate rises to depositors while pushing up mortgages rates by larger amounts.
Statisticians in the CSO said that in the fourth quarter of last year households saved €3.9bn, before adjusting for seasonality or inflation.
The statisticians said total disposable income of households in real terms was largely unchanged in the quarter, as inflation eroded higher income from employment and social protection.
Household consumption grew. This was partly due to high inflation, but also because more goods and services were used, particularly in the hospitality sector.
Statistician in the CSO’s National Accounts Analysis and Globalisation Division Peter Culhane said: “Irish households built up a lot of savings over Covid-19 and they are not winding them down.
“The saving rate was 20pc in October, November, and December (Q4) of 2022. “
He said this means that far from making up for missed opportunities to spend, households are now saving more than they did before the pandemic.
“We note that over the last seven quarters, the savings rate has been around 20pc,” Mr Culhane said.
He said that other CSO data shows that the wage bill is increasing because pay rates are going up and there are more people in employment than ever before. Households also received additional supports from the Government in response to inflation.
This meant household income rose.
However, when inflation is taken into account, household income only stood still.
Consumer prices rose as fast as incomes so real disposable income was largely unchanged over the third quarter in 2022.
Separate figures from the Central Bank show that there is close to €149bn in household savings in banks and credit unions.
This is despite deposit interest rates barely moving.
Permanent TSB this week increased its deposit rates, but by much less than the increase it announced in its fixed mortgages rates.
The best savings rate from Permanent TSB is a fixed rate of 1.5pc for amounts over €5,000. But the money has to be locked away for five years, said Daragh Cassidy of price comparison site Bonkers.ie.
This compares with fixed mortgage rates of between 3.9pc and 4.9pc, he said.
There is far more pressure coming on banks in the UK to be fair to savers.
This week Britain’s top financial regulator revealed it engaged directly with the boards of some UK banks for failing to pass on interest rate rises to savers as swiftly as hikes have been foisted on borrowers.
This is set to intensify the pressure on lenders which will soon have a legal duty to act in their customers best interest.
Chief executive of the Financial Conduct Authority, Nikhil Rathi, told the Treasury select committee on Wednesday, that the regulator was pushing banks to act ahead of new consumer protection rules that come into force in July when they will have “nowhere to hide”.
He told MPs: “We’ve already raised this specific issue [of the speed of rate rises], with, in some cases boards of banks, so it’s firmly on their agenda. We expect them to be looking at it. We certainly don’t want to be raising it [with boards] repeatedly.”