AIB latest lender to cut deposit rates in response to ECB

The bank also announced it is reducing the minimum balance needed to open a fixed-term deposit account to €5,000 from €15,000

The AIB fixed-term two-year rate will change from 3.02% to 2.77% annual equivalent rate and the AIB fixed-term one year rate will change from 2.5% to 2.25% annual equivalent rate, effective January 23, 2025. PIC: Conor Ó Mearáin / Collins Photos

AIB has become the latest Irish lender to cut deposit rates, following moves from Bank of Ireland and several fintechs operating in the market.

It follows a series of rate reductions from the European Central Bank, who have cut interest rates four times since June 2024.

The bank said it is cutting its one-year and two-year fixed term rates by a quarter of a percentage point, to 2.25% and 2.77%, respectively.

The reductions will be effective from Thursday, AIB said.

However, the lender announced it is reducing the minimum balance needed to open a fixed-term deposit account to €5,000 from €15,000 from February 5, with customers able save as much as they want with these products.

"The European Central Bank (ECB) decreased rates four times over the last year, with a cumulative ECB decrease of 1%," the bank said on Wednesday.

"AIB has not reduced any of its saving rates during that period, however reflecting the level of ECB decreases, AIB is now reducing rates by 0.25% on two Fixed Term savings products.

The AIB fixed-term two-year rate will change from 3.02% to 2.77% annual equivalent rate and the AIB fixed-term one year rate will change from 2.5% to 2.25% annual equivalent rate, effective January 23, 2025, the bank continued. 

Speaking on the announcement, Darragh Cassidy of Bonkers.ie said: "Last year the ECB cut rates four times and it’s likely to cut rates for a fifth time as soon as next week. While this is generally good news for mortgage customers, the downside is that it leads to lower returns for savers.

"Since the start of the year Bunq, Bank of Ireland, Raisin and N26 have all reduced their savings and deposit rates. So today’s news from AIB isn’t surprising."

Mr Cassidy added that Irish households still have a huge amount of money on deposit in accounts that pay little to no interest. 

"I’d really encourage anyone with savings to do something with them before rates fall further. There isn’t much time left as we’re likely to see more reductions over the coming months.

"By the end of the year the best savings rate on offer could be only 1.50%. Around half what it is now."

Mr Cassidy said he also expects AIB to announce further mortgage rate cuts very soon, adding: "Bank of Ireland and PTSB both cut their fixed rates again recently and AIB is probably reducing its savings rates to tee up a cut to its lending rates."