Savers to suffer most after latest ECB interest rate cut
SAVERS will suffer after the European Central Bank (ECB) cut interest rates yesterday.
Savers have benefited for almost four years from a price war that has seen banks outbidding each other to offer juicy interest rates on savings.
Banks have been desperately trying to entice consumers to deposit cash since the collapse of Lehman Brothers in 2008.
But more recently, banks were already engaged in cutting deposit rates, even ahead of yesterday's rate cut in Frankfurt.
And now the lowering of savings rates is set to intensify, experts said.
Households here have €92bn on deposit at 13 different banks and building societies, according to the Central Bank.
Bank of Ireland, ICS, EBS, AIB, Permanent TSB and Ulster Bank are among banks that have cut savings rates recently.
Economist with Goodbody Stockbrokers Dermot O'Leary said deposit rates would now be under new pressure.
"Deposit rates have been coming down. The decision yesterday of the ECB to again cut its key lending rate will put further downward pressure on deposit rates."
Spokesman for the Independent Mortgage Advisers Federation Michael Dowling said he expected banks to cut deposit interest rates to reflect the fact that mortgage rates are falling, in a move that is further squeezing the profits they can make from mortgages.
Outdoing each other on the interest rates offered for deposits has been very expensive for banks.
Earlier this week, AIB cut the interest it pays on a range of demand deposit rates by between 0.2pc and 0.25pc. Its subsidiary EBS has reduced the rates it pays on the majority of term deposits, but is paying higher interest on six-month and nine-month deposits.
BoI and its subsidiary ICS has imposed reductions of between 0.75pc and 0.25pc on a range of deposit accounts.
Yesterday, AIB boss David Duffy said what he called "high- priced deposits" were putting it under pressure.
This was why it was not cutting its variable mortgage rate.
"Our products need to be priced above our cost of funding to avoid generating further losses for our shareholders," he said.
Some of the best-value savings rates are available from An Post, where the annual rate is 3.23pc on the three-year Savings Bonds. This money can be taken out after a year, and there is no deposit interest retention tax (DIRT) on the bonds.