AIB has become the latest Irish lender to start cutting customer deposit rates, joining Bank of Ireland and neobanks operating in the market, following a raft of official rate cuts from the European Central Bank (ECB) last year.
The bank said it is cutting its one- and two-year fixed term rates by a quarter of a percentage point, to 2.25 per cent and 2.77 per cent, respectively, from Thursday.
However, AIB is reducing the minimum balance needed to open a fixed-term deposit account to €5,000 from €5,000 from February 5th, it said in a statement. Customers can save as much as they want with these products.
“The ECB decreased rates four times over the last year, with a cumulative ECB decrease of 1 per cent. 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 of a percentage point on two fixed term savings products,” the bank, led by chief executive Colin Hunt, said in a statement.
All other savings rates remain unchanged, including a regular saver rate of 3 per cent – which is in line with the top headline rates offered by the mainstream banks.
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 starts deposit rate cuts after ECB reductionsOpens in new window ]
Consumers have also been slow to move money into higher-rate accounts in recent years. Almost 87 per cent of the total of €161.5 billion of Irish household savings were held in on-demand or current accounts, where they were earning an average of just 0.14 per cent in November, according to the Central Bank.
AIB’s net interest income is set to slide 11 per cent this year to €3.61 billion, at almost twice the pace of the other two domestic retail banks, as the ECB continues to cut official rates, Deutsche Bank said in a report earlier this month.
Bank of Ireland moved two weeks ago to cut rates on certain deposit products. 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 five 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.
Avant Money, which is set to become a full bank branch of its Spanish owner Bankinter from April, is planning to launch a deposit offering in the coming months.
Avant Money chief executive Niall Corbett declined to be drawn in a recent interview with The Irish Times on a pricing strategy.
“We’ll try to bring to the market products that are innovative and flexible. But what’s really, really important for us is to be transparent – that there are no ‘gotchas’ or hidden fees,” he said.
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