Banks' interest rate offering to savers branded 'disgraceful'

Figures from the Central Bank show that the average interest rates of new household deposits with agreed maturity is 1.03% here compared to the EU average of 1.92%.

The low interest rates being offered to savers have been labelled “disgraceful” as banks have seen massive windfalls so far this year following European Central Bank (ECB) rate hikes on borrowers and mortgage-holders.

Since July last year, the ECB has steadily been increasing interest rates in an attempt to get a handle on inflation. Following its most recent hike announced last week, rates are up 3.75 percentage points.

Figures from the Central Bank show that the average interest rates of new household deposits with agreed maturity is 1.03% here compared to the EU average of 1.92%.

John Lowe, of financial advisory company Money Doctors, said the deposit interest rates being offered by the major banks is “disgraceful” and that savers would see a better return if they put their money into State prize bonds or regular stock market saver accounts.

Not only are people getting very little return but “inflation is eroding it", he said.

Mr Lowe also noted that even though some of the banks will offer these interest rates, those returns are before Deposit Interest Retention Tax (DIRT) of 33% is factored in.

'Everyone is happy in the bank'

Mr Lowe said the banks are using this period to build up their profits. 

"While they are not paying anything to the depositors and they are getting higher money from the people who’ve borrowed, everyone is happy in the bank. The losers are the deposit holders.” 

Bank of Ireland’s Regular Saver account offers a rate of just 0.75% while its 12-month fixed-term offers 0.5% return. AIB’s 12-month fixed-term rate also stands at 0.5%.

Permanent TSB’s one-year fixed-term account offers 1% while its other fixed-term accounts — ranging from 18 months to five years — offer between 1.25% and 1.5%.

In their latest updates for the first three months of the year, all three pillar banks — AIB, Permanent TSB, and Bank of Ireland — reported strong performances, all of which cited interest rate increases by the ECB as a reason.

AIB said income rose by 70% due to tightening monetary policy and it expects to reach a net interest income of €3.3bn this year — up from the December estimate of €3bn.

Permanent TSB said its net interest income was running 86% higher between January and February compared to the same period last year. Bank of Ireland recently said its net interest income is expected to be 12% higher than the annualised run rate of €3bn seen at the end of last year.

Bank of Ireland and Permanent TSB said they keep their rates under review.