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Independent

Savers will be the big losers as interest falls

SAVERS will be the big losers from the ECB decision to cut its key lending rate, writes Charlie Weston.

Deposit rates have been falling every month for more than a year, as banks attempt to improve their profit margins.

Experts said yesterday's cut would prompt a new round of deposit-rate reductions.

And ECB president Mario Draghi hinted that he may take the unprecedented step of charging banks to park excess cash with the ECB overnight.

So-called negative deposit rates would be instead of paying interest to banks that deposit spare funds with the ECB.

He also hinted that another cut in the main lending rate is possible.

Simon Moynihan of comparison site Bonkers.ie said savers have been badly hit. They now earn substantially less on their money than a year ago with interest rates now almost 1.5pc lower than May last year.

Among the best rates on offer at the moment is the 12-month fixed rate from KBC Bank paying 2.8pc. But this is down from 4.15pc last year. Nationwide UK Ireland is paying 2.75pc for its 12-month fixed rate.

Deposit interest retention tax (DIRT) is now 33pc and inflation is 0.5pc, which means most savers are losing money by putting money on deposit.

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