Lender Responds to Government Criticism: ECB Rate Hikes Not Passed On
As of September 8, interest rates are set to rise. However, Irish politicians, including Finance Minister Michael McGrath and Further Education Minister Simon Harris, have criticized banks for only partially passing on the European Central Bank (ECB) interest rate increases to savers. This has resulted in banks profiting significantly from depositors’ funds.
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In response, Bank of Ireland has increased the rate on its SuperSaver deposit product from 2% to 3% for the initial 12-month period. After the first year, a rate of 2% will apply on balances up to €30,000. Previously, the rate reverted to 1%. These new rates are available to new and existing customers without any action required from existing customers as the new rates will automatically apply.
Bank of Ireland has also increased the rate on its MortgageSaver accounts. The rate on balances up to €15,000 has been raised from 1% to 2%, and a rate of 0.50% will now apply to balances above €15,000. Additionally, the rate on the Regular Saver account has been raised from 1% to 2% on balances up to €12,000, and a rate of 0.50% will now apply on balances beyond that. The bank has also introduced new term deposit accounts, allowing customers to access up to 10% of the initial balance without penalty. The Six Month Term Deposit will have a rate of 1.5%, while the One and Two Year Term Deposits will have rates of 2%. These rates apply to both personal and business customers.
In addition to these changes, Bank of Ireland will increase the 31-day Notice interest rate to 1% (previously 0.5%), and the rate on Demand Deposits will be raised to 0.10% (previously 0%).
Susan Russell, CEO Retail Ireland, Bank of Ireland, stated, “Since the ECB started to increase rates last year, we have made a number of improvements to our savings products. These latest changes will increase our SuperSaver to a market-leading 3%. Customers are telling us that they want a term account but also the security of some access to cash in the event of an unexpected expense. The addition of the 10% access feature to our Term Deposit accounts and our improved rate for 31 Day Notice Accounts provides access to savings and competitive rates.”
Last week, Finance Minister Michael McGrath acknowledged the commercial decisions made by banks regarding deposit rate increases, but also expressed the expectation of improvements in the rates being paid to savers and depositors. He stated that the banks have not fully passed on the increases in interest rates to mortgage holders, and a similar situation arises with savers and depositors. However, he anticipates progress will be made in addressing this mismatch in the coming weeks.
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