Bank of Ireland has unveiled a new savings product with an introductory rate of 1.5 per cent for the first 12 months, as Irish banks come under increasing pressure to pass on some of the recent central bank rate increases to deposit holders.
While the initial rate, available from next month, will be the highest among Irish banks for regular savers, it is less than half the 3.25 per cent annual rate banks are receiving for excess deposits placed with the European Central Bank (ECB).
Central Bank officials told the Oireachtas finance committee last month that Irish banks currently have about €60 billion of surplus money stored with the institution, which is acting on behalf of the ECB.
The money is currently generating a gross annualised return of €2.1 billion, following the latest increase to official rates last week, driving Irish banks’ profits higher even as they have been lagging behind many European peers at increasing mortgage rates.
AIB, where the best savings rate available is a 1 per cent annual return on its online saver product, faced criticism at its annual general meeting (agm) earlier this month from shareholders who are also customers over its low savings rates. Bank of Ireland and Permanent TSB may face similar questions at their upcoming agms, according to industry observers.
Irish households are generating little or nothing on current accounts across the State’s banks. Current accounts are the main source of household deposits for the sector.
The 1.5 per cent rate on new Bank of Ireland so-called SuperSaver deposit account is capped at savings of €30,000 and will default to the bank’s regular savings rate after 12 months. The regular savings rate will rise by a quarter of a percentage point to 1 per cent from Friday, it said.
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“With a 1.5 per cent rate, combined with a €100 discount on home or car insurance [on offer with the new product], we’re doing more to reward regular savers,” said Susan Russell, director of the bank’s retail Ireland unit.
“We also want to encourage those who don’t save to start that habit, even with a small amount each month.”
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The bank is also introducing a new one-year fixed-term deposit product, carrying a rate of 0.75 per cent for both personal and business customers, with no savings limit. It marks an increase of 0.25 percentage points on its previous 12-month fixed-rate product, which had caps on savings eligible for the rate.
On the lending front, Bank of Ireland has so far added 1.5 percentage points to the cost of its fixed mortgage rates since the ECB increased its main lending rate from zero in July to 3.5 per cent.
