Everyone knows that RaboDirect pitch themselves as a bit of a Fort Knox for Irish savers. Your money is safe with us, Ireland’s only Triple A bank and so on.
They’ve been at this pitch for a long time but it seems to have been working particularly well for them recently. Although I have no access to their numbers, I have it on reasonable authority that they have been very busy hoovering up lots of nervous money from former customers of Anglo, Irish Nationwide and the likes.
Rabo have also just put up their demand rate to 2.25%, which isn’t half bad when you consider that Bank of Ireland and AIB offer 0.01% for the same kind of account. In fact Rabo even suggest that customers put money into a demand account rather than their 1-year term because their own interest rates on short-term accounts aren’t up to much at all.
The Irish banks are doing exactly the opposite – offering whopping rates on term accounts and really rubbish rates on the instant access types. In fact, you’d need to have been living in a box not to notice the brutal rate war that’s broken out amongst nearly all the banks operating in Ireland. And it’s all very targeted. They’re interested in people with big heaps of cash and they all want to lock it down for at least a year. And the interest rates on offer are so high they might just tempt some of that money back from the likes of Rabo.
Not that long ago the Irish banks were offering customers high interest for much longer terms, but my guess (and search patterns on bonkers.ie back this up) is that Irish savers are just not comfortable putting their money away for any longer than a year right now and that makes one-year terms the new banking battlefield.
So, in the marvelously unlikely event that you’ve got about €20,000 sloshing about that you don’t need for at least a year, and you haven’t a rashers what to do with it, I’ll help you out by taking a look at some of those one-year term accounts. I’ll cut through the marketing waffle and you can decide if any of them are up to scratch.
I’ll go through them in alphabetical order and perhaps hazard a verdict at the end. There are absolutely loads of term accounts out there, so I’m going to do just one year terms and try to stick to one per institution – and mostly the ones they are advertising like crazy.
AIB – One Year Fixed Term Reward Account
Credit Rating -BB
AER - 3.70%
Deposit amounts -€1 to €1,000,000
Positioning –Above the fold on the AIB home page, advertised everywhere.
Funny business –If you take out so much as a penny during the 12-month term, you’ll lose all but 1% of the interest. This is pretty standard stuff, so if you’re opening a term account, you should be prepared to do the time.
Bank of Ireland – 1 Year Introductory Fixed Term Reward Account
Credit Rating –BB+
AER - 3.60%
Deposit amounts -€10,000 to €500,000
Positioning –Not currently on the homepage, light advertising. BOI is focused on flogging their Double Your Interest account.
Funny business –This account is much like the AIB reward account except they don’t tell you how much interest you’ll lose if you make a withdrawal. They just say that a “lower default interest rate will apply” if you take out any of your money. I couldn’t find this default rate, so it’s probably their 0.01% demand rate. Ouch.
EBS – 12 Months Fixed Savings Account
Credit Rating –BBB-
AER - 3.70%
Deposit amounts -€20,000 to no upper limit
Positioning –This is a quiet one. EBS are bashing away with their 15 and 18 month terms instead.
Funny business – They say that this account is for new money only. So if you have the cash on deposit with EBS already and want this rate, you’ll probably have to threaten to take your dosh somewhere else before they’ll let you have it. Again, it’s not unusual for banks to offer their best rates to new money, but it sure is infuriating to existing and loyal customers.
Investec – 12 Month Fixed Term Deposit Account
Credit Rating –BBB
AER - 3.50%
Deposit amounts -€20,000 to €2,000,000
Positioning –They seem to be pretty quiet about this account.
Funny business –Investec allows a once off withdraw of up to 20% which sweetens the deal a little. The funds are guaranteed by the UK deposit protection scheme, which limits compo to £85,000 but may make some depositors a little more comfortable.
KBC – 1 Year Fixed Rate Account
Credit Rating –BBB+
AER - 3.65%
Deposit amounts -€10,000 to no upper limit
Positioning –It’s on the home page and there has been some advertising but nothing like the kind of saturation we’ve seen from some of the other banks.
Funny business –This account allows you to make one withdrawal of up to 25% of your money without any penalty, which is quite handy – of course it will lower your interest somewhat, but it’s good to see a term account with a safety valve of sorts.
Nationwide UK Ireland – 12 Month Fixed Rate Savings Account
Credit Rating –A+
Deposit amounts -€3,000 to €2,000,000
Positioning –Above the fold on the homepage, light advertising.
Funny business –There’s a 90 day interest penalty for early withdrawal, but you’d expect that. There’s also a bit of a dearth of branches, but you shouldn’t be needing to go see them very often, so that shouldn’t matter too much.
Permanent TSB – Interest First Savings Account
Credit Rating –BB+
AER - 3.50%
Deposit amounts -€10,000 to no upper limit
Positioning –Above the fold on the PTSB homepage, saturation advertising.
Funny business –Well, you get your interest first which is very interesting. And there’s nothing stopping you from taking that interest and putting it in another one of the term accounts and earning interest on the interest! Naturally there is a penalty for making a withdrawal, which of course is not interesting at all.
Permo also has a 1-year term account that pays 2.90% but they don’t hock it at all. Which isn’t surprising because you’ll get better interest just about everywhere else, and they want to drive customers to this account.
RaboDirect – 1 Year Term Deposit Account
Credit Rating –AAA
AER - 1.80%
Deposit amounts -€500 to no upper limit
Positioning –None, Rabo don’t flog this account at all. In fact they suggest you put your money into their demand account instead.
Funny business –Well, the interest rate is very low compared to the competition and I’m sure the usual penalties apply if you want to make an early withdrawal - although I couldn’t find out exactly what they were. To get anything like the rates being offered by the Irish banks, you’d need to commit to a five-year term with Rabo.
Despite their little quirks and differences, most of these accounts are remarkably similar and most also have interest rates somewhere between 3.50% and 3.70%, which makes choosing an account difficult.
If you don’t have a huge amount of money to put away, AIB is probably the best bet as they’ll open an account for you with as little as one euro where most of the rest of them want 10 or 20 grand.
I did say I’d hazard a verdict on which one I thought was best, and after going through all of them, I’d be inclined towards Nationwide UK. They’ll open an account with €3,000 which isn’t bad, they are the only bank besides Rabo with an A credit rating and they actually have a couple of branches. Most importantly they’re offering 3.65%, which is only one twentieth of a percent off the best rate, and they have a UK guarantee.
If you’re wondering where An Post and Ireland’s State Savings are, well they just don’t do one-year terms. They want you for longer than that and the accounts run from 3 to 10 years so you really need to be up for a commitment.
You might also have noticed an Ulster Bank one-year term account advertised over the last month or so. It was offering 3.50% but it’s not on their website and I couldn’t verify the details or whether it’s still on offer, so I’ve left it off the list.
And of course there is the Double Your Interest account from Bank of Ireland. I feel I should mention it because it’s being advertised everywhere from bus shelters to the radio. It’s a one-year term that pays 3%. Or it’s a two-year term that pays 4.5%? Or it’s both? Anyway, you put your money in for a year and get 3% interest. Then you can either take it out or roll it over for another year. The second year pays 6%. So it’s either a one-year term that pays 3% or a two-year term that pays 4.5% and that’s about the size of it. But 4.5% AER for a two year term is massive and currently the highest rate of interest in the market.
One year terms are definitely the account du jour and the interest rates are very high. So much so that in his latest blog, RaboDirect boss Roel van Veggel say that these rates are unsustainable, and he’s probably right. With 60% of Irish mortgages holders currently on trackers and paying about 2.25%, Irish banks trying to attract new money with rates of 3.7%, and outside financing costing more than 5% - there just doesn’t seem to be any way this can go on for long. So if you’ve got the cash, jump on while you can.