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On March 16th, the European Central Bank took the historic step of cutting its main interest rate to 0.00%, meaning that Irish banks can now borrow from the Bank for free. We wrote a piece about what the cut will mean for Irish customers and predicted that “it is likely that customers will see cuts of between 0.10% and 0.25%…in the coming months”.
Well, we didn’t have to wait long to see this come true, as this week saw four financial institutions - three banks and Ireland State Savings – cut the rates of return they are offering to savings account holders.
The National Treasury Management Agency, which sets the rates for Ireland State Savings (An Post), kicked off the week of savings rate cuts by announcing that it was lowering the interest rate on its demand deposit accounts from 0.25% to 0.10% . But this isn’t where the cuts ended.
The rate of return for An Post’s 3-year savings bond was cut by 0.50% to 0.33%, and there was a cut of 0.49% announced for its 4-year account, taking the rate down to 0.50%.
Longer-term accounts have also been changed, with the NTMA slashing the return on 10-year accounts by 0.76% to 1.50%, as well as on 5- and 6-year accounts, which have seen rates lowered to 0.98%.
The changes were introduced with immediate effect but existing customers on fixed-rate products will have their rates honoured until the end of their term.
Following An Post’s savings rate cuts, EBS announced a range of cuts of its own two days later.
The bank, which is a subsidiary of AIB, has cut its 15-month fixed savings rate by 0.05% to 0.45% and knocked 0.10% off its 2-year, 3-year and 5-year Sure Growth Accounts.
When interest rates are low across global markets, it’s usually bad news for savers but good news for mortgage holders, who sometimes benefit from cuts to their variable repayment rates. However, this has not been the case for EBS customer (yet, anyway), as when AIB announced a cut to its standard variable rate last month, there was no such good news for EBS customers.
EBS’ parent bank, AIB, was the third financial institution to cut savings rates this week.
The bank cut the rate of return on its standard demand deposit account by 0.04%, bringing it down to 0.01%. That means a customer will only make 1 cent for every €100 saved with the bank.
The rates of return on AIB’s 9-, 12- and 18-month fixed rate accounts were all cut by 0.05% to 0.25%, 0.25% and 0.35%, respectively. And the biggest cut was reserved for the bank’s 24-month account, which now has a savings rate of 0.45%, down from 0.55%.
Bank of Ireland rounded off a week of bad news for savers by announcing cuts to a range of accounts today.
The bank’s 3- and 4-year accounts today have all had their rates cut by 0.10%, and the 5-, 6- and 7-year accounts’ rates has been slashed by 0.14% to 0.98%, 1.12% and 1.25%, respectively.
It certainly hasn’t been a good week for Irish savers, and there hasn’t been much good news on the savings front for some time.
The Central Bank recently revealed that the average rate of return for new savings account customers in Ireland is down 2 basis points to 0.16% in the last year, up to the end of April.
Things are somewhat better in other parts of Europe, with the average rate for new customers standing at 0.61%, but as long as the ECB’s rate is at the historic low of 0.00%, savers shouldn’t expect to see very big returns from the traditional method of saving with a bank.
With rates so low, it’s more important than ever to make sure that you’re at least getting the best rate that’s now available.
And there is still some good value to be had out there, if you know where to look. For example, KBC is offering a 2.5% return on its regular saver account to its current account customers and EBS has a 3% return available on small-sum regular saver accounts.
You can see which rate is best for your savings requirement, visit our Compare Savings Accounts page.
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