Banks plan to slash savers' interest rates again
- Bank of Ireland has recently cut interest rates on term deposits by 0.25 percentage points.
- AIB and PTSB are also expected to lower their deposit rates in response.
- The trend reflects an ongoing adjustment to ECB rate cuts and aims to protect bank profit margins.
In January 2025, banks in Ireland, including AIB and Permanent TSB (PTSB), are anticipated to implement further reductions to deposit interest rates. This decision comes in the wake of similar actions by Bank of Ireland, which recently decreased rates on 12 and 18-month savings accounts by 0.25 percentage points. Factors influencing this downward trend include ongoing rate cuts by the European Central Bank (ECB) aimed at managing inflation and stabilizing the economy. The ECB's previous cuts, totaling four in the last year, have led banks to adjust both mortgage and deposit rates accordingly. Expert Denis McGoldrick, a banking analyst with Goodbody, indicated that all three major banks, namely AIB, PTSB, and Bank of Ireland, have been proactive in modifying mortgage rates in response to the ECB's policy changes. The expectation is that these banks will continue to adjust their deposit offerings as they strive to maintain profit margins amidst the ongoing economic adjustments. With the ECB projected to introduce an additional four to five rate cuts throughout 2025, banks are likely finding it necessary to decrease deposit rates to counterbalance the impact of these monetary policies. The consequence of these anticipated reductions will significantly affect savers across Ireland. As banks lower their deposit rates, consumers may find reduced returns on their savings, prompting them to reconsider their savings strategies. This environment can create challenges for individuals seeking to grow their wealth through traditional savings accounts. Similarly, changes in mortgage rates may create a ripple effect on housing affordability and the overall real estate market in Ireland. As these adjustments unfold, savers will need to be vigilant in exploring better investment opportunities amid a changing financial landscape. Overall, as predictions signal continued downward pressure on deposit rates from the banks, the potential future adjustments could catalyze a broader movement among financial institutions in Ireland to seek alternative ways to bolster their profitability while navigating the realities of the economic environment in which they operate.