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Savings rate war breaks out as Bank of Ireland enters fight with new accounts

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Savings rate war breaks out as Bank of Ireland enters fight with new accounts

Bank of Ireland surprised the market by introducing two new deposit accounts paying up to 3pc.

It comes as new figures show Irish consumers are starting to shift their savings out of demand deposit and overnight accounts that pay little or nothing in interest into higher-yielding term deposit accounts.

The volume of term deposits held by households at Irish credit institutions reached over €10bn last month, according to the latest ECB figures, independent economist Simon Barry said.

That is the highest level since the early months of the pandemic in May 2020, and is more than double the level seen as recently as last September.

Households have been consistently putting money into term deposits for the past 14 months.

“Households continue to gradually respond to the higher rates of interest available on term deposits, where the average in March was 2.51pc compared with a market average of just 0.13pc for overnight deposits,” Mr Barry said.

He said the share of total household deposits held in low-paying overnight accounts is still extremely high, at 89.1pc in April.

The Bank of Ireland move to offer better savings rates is seen as a response to fast-growing Revolut, which last week launched a savings product in the Irish market paying up to 3.49pc.

Bank of Ireland’s plan to introduce two new higher-paying accounts for savers is seen as a direct response to Revolut entering the market here for savings.

The money app claims it has 2.7 million customers in this country.

The savings rates war comes at a time when banks here were expected to cut rates, as the European Central Bank is due to start reducing its interest rates from next week.

Now, Bank of Ireland is to introduce a new two-year fixed-term deposit rate for personal and business customers of 3pc AER (annual equivalent rate).

And there will be a new one-year fixed-term deposit rate for personal and business customers of 2.5pc.

The new rates will be available from June 6.

The bank said there will be no upward limit on funds that can be deposited or on funds that will attract interest, while up to 25pc of funds can still be withdrawn during the term.

Bank of Ireland director, retail Ireland, Susan Russell said: “Our new one- and two-year fixed-term accounts offer better rates along with flexible features like being able to access some of your cash if needed and easy account opening in-branch or online.

“There is no requirement to open a current account and no fees or subscriptions to access these rates.”

Daragh Cassidy of price comparison site Bonkers.ie said: “These are competitive rates from Bank of Ireland.”

He said that over the past few weeks, we have seen both N26 and Revolut launch savings products for their customers in Ireland and “this appears to be a clear response to that”.

Mr Cassidy said Irish savers are collectively missing out on billions of euro in interest a year by not putting their money into the best-yielding savings accounts.

Instead, they are leaving it in accounts that pay little to no interest. And this apathy is also helping the banks make record profits.

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