Irish savers continue to be hit by low interest rates offered on deposit accounts.
According to the Central Bank, the average rate available on overnight deposit accounts, where savers in the Republic hold a massive €137 billion, was a mere 0.13 per cent in July, unchanged for the seventh consecutive month.
Retail banks have been heavily criticised for failing to increase their deposit rates in line with European Central Bank (ECB) rate levels while reporting big annual profits, part of which stem from the money they make from deposits held with the ECB itself.
To date Irish banks have passed only a fraction of the interest rate hikes adopted by the ECB, costing Irish savers billions of euros in lost interest.
“With such a low level of return and inflation running at well over 2 per cent, such savers are actually losing money at the difference between the two rates; their savings are being eroded,” deputy chief executive of Brokers Ireland Rachel McGovern said.
And while there is evidence that some such savers are beginning to move to longer term accounts with better returns – with the weighted average interest rate on new household deposits with agreed maturity at 2.77 per cent – not enough savers were doing so, she said.
“People should consider much more carefully how they can make their savings work better for them and take financial advice to consider all options, aligned to their future plans.”
The latest retail interest rate data show the average interest rate charged on new mortgages in the Republic was 4.11 per cent in July, unchanged from June. The average Irish rate compared to an average for the euro area of 3.72 per cent.
The figures come in advance of an expected ECB rate reduction on Thursday.
Ms McGovern said many households here were in a “wait and see” period with Frankfurt likely to reduce its headline rates by 0.25 per cent this month and possibly by a further quarter point before the end of the year.
The latest Central Bank data indicated that fixed-rate mortgage agreements constitute 69 per cent of the volume of new mortgage agreements in July.
This was down from 70 per cent in June and 86 per cent in May last year.
The number of new buyers in the Republic opting for fixed rates has risen sharply in recent years. In 2014, fixed-rate products accounted for just 10 per cent of Irish home loans.
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