Bank of Ireland has decided to cut rates on certain deposit products, becoming the first domestic bank to do so since the European Central Bank (ECB) started to cut official borrowing costs last June.
The largest retail bank in the State by assets said on Tuesday that it is reducing the interest rate on its 12 and 18-month fixed-term deposits by a quarter of a percentage point from Friday.
That will see the 12-month rate fall to 2.25 per cent and the annual rate on the 18-month product decline to 2.73 per cent.
No other savings products are affected and Bank of Ireland’s top rate of 3 per cent rate on its so-called supersaver product, applicable for the first 12 months after setting up such an account, remains.
“Customers who are already in the process of opening a 12 or 18-month term deposit account can still avail of the existing rates if they open their account by 8 January,” the bank said.
The move by Bank of Ireland is likely to be a starting point for the mainstream banks, as the ECB continues to cut official rates this year amid easing inflation.
The ECB has cut its key deposit rate by a total of 1 percentage point to 3 per cent since June and is expected by financial markets to continue to reduce over the course of 2025 to leave it at 1.75 by the end of the year.
What’s in store for 2025?
Irish banks had lagged European peers in passing on deposit rate increases as the ECB increased key rates by 4.5 percentage points between July 2022 and September 2023 – resulting in savers effectively subsidising borrowers as bank were also behind the curve in increasing mortgage rates.
Bank of Ireland is not, however, the first deposit-taker in the market to reduce savings rates since the ECB set off on a path of easing rates.
Neobanks Revolut, which operates in Ireland through a Lithuanian banking licence, and German-based N26 have each reduced savings rates on offer to Irish customers since in the past four months.
Raisin, an online marketplace for savings accounts across Europe, has also reduced the savings rates from some of its partner banks to Irish customers.
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