Savers transfer €11bn into better-paying accounts as PTSB launches new product

The move by savers to get better interest rates comes as PTSB launches a new personal savings product it calls Interest First, in a sign of better competition among banks for savers’ funds.

The deposit product pays 2.75pc AER (annual equivalent rate) for one-year fixed-term savings.

PTSB, whose CEO is Eamonn ­Crowley, said the product is unique in the Irish market because customers can receive their interest upfront as a lump sum within the first month of opening the account, instead of waiting until the end of the one-year fixed term.

Customers can then earn interest on their interest by reinvesting it in another savings account, if they wish to do so.

They also have the option of withdrawing the money by transferring it to a current account, or a bank account that can receive inbound transfers, or receive a cheque payment.

The interest rate that customers earn will not change over their fixed-rate term, PTSB said.

PTSB’s head of retail distribution ­Eddie Kearney said: “Our Interest First deposit product is the only one of its kind in the Irish market and provides our customers with an innovative way to get access to their interest, without having to wait until the end of their fixed-rate term.”

A minimum balance of €5,000 applies, and the product is only available to personal customers.

If the customer makes a withdrawal before the end of the fixed term, an early withdrawal charge will apply and any interest that was paid upfront in respect of the remaining term will be deducted from the account balance, and the account will close.

PTSB said partial withdrawals are not permitted.

The move by PTSB to reintroduce its Interest First product, which was last available in 2021, is due to customer demand, the bank said. It is coming in at a time when consumers are starting to respond to better savings rates by moving funds out of overnight demand deposit and current accounts, which pay little or nothing, into fixed-term accounts paying better interest rates.

European Central Bank (ECB) figures show that some €8bn in Irish household savings was put into term-deposit accounts paying higher interest in the year to May. This has taken the total amount in term deposits up to almost €11bn, according to calculations by independent economist Simon Barry.

He said the ECB figures show a new record high last month for household savings in this country, as total balances rose by €1.1bn month-on-month in May to take the total to €155.6bn.

This is the fastest growth recorded in three months, he said.

“Looking at the detail of the figures reveals further evidence of the ongoing shift in the types of deposit accounts that are being availed of by Irish households,” Mr Barry said.

The amount of savings held in overnight balances has fallen by €3.4bn since May of last year, he added.

The average interest rate available to Irish households for new-term deposits was 2.65pc, compared with just 0.13pc paid on overnight balances.

Despite the recent shift to putting more savings money into better-paying term deposits, some 89pc of savings in this country are still held in overnight demand and current accounts.

This compares with an average of 54pc across the eurozone.

Mr Barry said that if Irish savers put the same proportion of their funds in term deposits as the average in the eurozone, they would collectively earn more than €1.3bn more in interest income.