Bank of Ireland raises interest rates for savers up to 3%

The move puts Bank of Ireland as a market leader among deposit holders, putting additional pressure on AIB and Permanent TSB to increase their own offerings for savers 

Ireland pillar banks have come under criticism in recent months for failing to pass on the ECB's interest rate hikes onto consumers

Bank of Ireland has announced new deposit rates for customers, offering a "market-leading" rate of 3% on certain products. 

The bank is the first to respond to increased pressure from the Government to increase deposit rates following nine consecutive interest rate hikes from the European Central Bank.

Coming into effect from the 8th of September, new and existing Bank of Ireland customers with a SuperSaver account can avail of 3% interest, up previously from 2% for an initial 12-month period, after which, a rate of 2% will apply on balances up to €30,000.

In addition, interest for Mortgage Saver account holders will increase from 1% to 2% on balances up to €15,000, with a rate of 0.5% applied to balances in excess of €15,000.

"Market leading 3%"

Speaking on the changes, Susan Russell, CEO Retail Ireland, Bank of Ireland, said, "Since the ECB started to increase rates last year, we have made a number of improvements to our savings products. These latest changes will increase our SuperSaver to a market leading 3%."

“I would encourage customers to switch their money from their current account to a savings or deposit account where they will benefit from interest payments. The market has gone from eight years of negative rates and, now that savers can benefit from better rates, we are encouraging customers to take action."

For regular saver accounts, interest on amounts up to €12,000 will be doubled to 2% from a previous 1%, with a rate of 0.5% on balances above €12,000.

Bank of Ireland has also added a new "10% Access" feature to 6 month, 1 year and 2 year term deposit accounts, allowing account holders access of up to 10% of the initial balance. 

Available for both business and personal accounts, a rate of 1.5% will apply on 6 month deposit accounts, while a rate of 2% will apply to 1 and 2 year term deposits.

In addition, Bank of Ireland's 31 day notice interest rate will be increased to 1% from a previous 0.5%, while interest on demand deposits will rise to 0.1% from a previous 0%, which will be applied automatically.

Ms Russell also added that the bank was "very conscious" of the challenges a rising interest rate environment brings for mortgage customers, adding that the bank "takes a very measured approach in relation to our mortgage rates."

“Bank of Ireland will continue to keep rates under review into the future," Ms Russell concluded.

Ireland's pillar banks have come under extensive criticism in recent months for failing to pass on the ECB's interest rate hikes onto consumers, all while mortgage rates continue to increase.

Earlier this month, Standard & Poor found Ireland to have the lowest deposit rate gains out of the Eurozone, UK and US, with just 7% of interest rate hikes being passed on to savers.

'Offensive rate offerings'

Speaking last week, Further Education Minister, Simon Harris, slammed Irish banks for failing to pass on interest rate increases to saving deposit accounts, describing the situation as "offensive", with mortgage holders being hit by increased rates due to European Central Bank (ECB) rate hikes, but savers not reaping any benefits.

In addition, Finance Minister, Michael McGrath said he hoped to see improvements in the next few weeks, adding that it was time for ECB interest rate hikes to be passed onto savers. 

The move puts additional pressure on AIB and Permanent TSB to match Bank of Ireland's now market leading rate of up to 3%, with all three banks recording bumper half year profits on the back of the ECB's aggressive interest rate campaign.

Speaking on the increase, Head of Communications at Bonkers.ie, Daragh Cassidy welcomed the move, telling the Irish Examiner, "The main banks have come under huge pressure over the past few weeks to improve their deposit rates. And it would appear Bank of Ireland has caved in to the pressure.

"This is obviously good news for savers and I’d expect AIB and Permanent TSB to also increase their rates over the coming weeks, if not day."

However, Mr Cassidy, said that he was concerned that increased savings could come at the expense of mortgage holders, adding, "I wouldn’t be surprised if Bank of Ireland also announced a hike to its mortgage rates over the coming weeks - though it has to be said its fixed mortgage rates in particular are very low given where ECB rates are right now.

"The devil is also in the details. The new 3% rate from Bank of Ireland is only available for one year on its SuperSaver account - it then reverts to 2%. And it’s a regular savings account. You can’t deposit a large lump sum."

"I’d encourage anyone with large savings in a demand deposit account or current account to look at moving their money to a fixed-term savings account - provided they don’t require access to the money in the short term of course."