Interest rates on some State Savings products have increased for the first time in 17 years, leading consumers to hope for a better return on their investment across the board.
Some of Ireland’s State Savings products have seen their interest rates increase, providing some good news at last for savers who have seen little return on their money in recent years despite inflation being at near record levels.
The State Savings, run by the National Treasury Management Agency (NTMA), aren’t subject to the Deposit Interest Retention Tax (DIRT) of 33% which applies to other savings earnings, meaning they're a popular choice for savings for Irish consumers.
However, they've become less and less viable over the years, suffering seven cuts to interest rates since August 2017, the last in January of 2021.
As such, the news of the first increase in almost two decades is welcome news for those looking to squirrel away some funds while inflation stays elevated.
What State Savings products are changing?
There are a total of four different State Savings products that have seen an increase to their interest rates.
- The National Solidarity Bond (10 years) - Has been increased from 10% (0.96% AER) to 16% (1.5% AER). A €5,000 investment which would have previously have seen a €5,501 return, has now increased to €5,802.
- Savings Certificate (5 years) - Has been increased from 3% (0.59% AER) to 5.5% (0.98%). A €5,000 investment which would have previously seen a €5,149 return, has now increased to €5,249.
- Instalment Savings (6 Years*) - Has been increased from 3.5% (0.63% AER) to 5.5% (0.98% AER). A €5,000 investment which would previously have seen a €5,175 return, has now increased to €5,275.
- Childcare Plus (6 Years*) - Has been increased from 3.5% (0.63% AER) to 5.5% (0.98% AER). A €5,000 investment which would have previously seen a €5,175 return, has now increased to €5,275.
*1 year saving with 5 years investment
Will we see increased saving rates from Irish banks?
While it’s still too early to tell, there have been some signs that banks are starting to offer higher savings rates.
Both Bank of Ireland and Permanent TSB have increased their savings rates in 2023 – albeit these have come at the same time as mortgage rate rises.
A big story of the past 12 months has been the relative lag of mortgage rate increases in conjunction with ECB hikes. Ireland now has the third-cheapest mortgage rates in the Eurozone, as banks here have been so slow to pass on the ECB hikes, which have seen the main lending rate go from 0% last July to 3.75% now.
One theory is that Irish banks are trying to keep mortgage rates low to help first-time buyers at the expense of savers. However, only time will tell if this remains the case.
Irish banks are also awash with deposits right now, with Irish households among the best savers in Europe, so Irish banks don't need to offer good rates to attract any more capital.
But it’s going to be an interesting few months to see if any lenders start incentivising savings. But it's hoped the increase will put pressure on the banks to offer more attractive rates over the coming months.
Read more savings accounts articles
Here at bonkers.ie we’re on a mission to arm consumers in Ireland with knowledge about all of the services we provide.
As such, there are plenty of articles and guides on our website which help you learn more about savings accounts. Such as:
- A breakdown of 14 different savings account questions you may not know yet.
- For an essential guide on all of our different money-saving guides, click right here.
- There are a lot of different savings terms and phrases. We break them down here.
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