It is a “matter for the other banks” as to whether they will follow AIB and EBS in increasing their interest rates for savers, the Finance Minister has said.
AIB and its subsidiary EBS have both increased their interest rates on several different deposit accounts today.
The new 2% rate will apply to the bank’s Online Saver, AIB Junior Saver and Student Saver accounts as well as the EBS Family Saver.
The new rate will only apply to the first €1,000 per month for 12 months – with a rate of 0.1% set to apply after that period.
Meanwhile, the rate on the bank’s one-year fixed-term offering for personal and business customers with deposit balances over €15,000 is increasing by 1% to 1.5%.
It comes after Irish banks have faced criticism for their failure to pass on ECB interest rate increases to customers.
The move is now likely to put pressure on Bank of Ireland and Permanent TSB to follow suit.
“People have a legitimate expectation that they would earn a reasonable rate of return on their savings.”
The Finance Minister says it is a “matter for the other banks” as to whether they will follow AIB and EBS in increasing their interest rates for savers. pic.twitter.com/6pOqscw7h6— NewstalkFM (@NewstalkFM) June 13, 2023
Speaking on his way into Cabinet today, Finance Minister Michael McGrath said banks may have been slow to introduce the rises – but insisted they have also shown “forbearance” in hitting mortgage customers with the increases.
“I think we do have a level of competition among the banks in Ireland and for people who are saving, I know this is an issue that many of them have been raising and surely, they will welcome the increase in the savings rate,” he said.
“That said, we have seen the banks exercise some forbearance in terms of not fully passing on to variable rate products, and indeed to the new pricing of fixed rate mortgage products, the full impact of the ECB changes.
“So, there is that trade-off there that the pricing on deposits can have an impact on the pricing of mortgages as well, so we just need to be conscious of that relationship.”
Savings
He said customers have a “legitimate expectation that they would earn a reasonable rate of return on their savings.”
“[They can expect] that that level of return would reflect changes in interest rates at ECB level and I think we have now seen a move in that regard today,” he said.
“It will be welcomed by many savers and it is a matter for the other banks as to whether or not they wish to change their pricing.”
Cost-of-living
Minister McGrath said the cost-of-living crisis and high mortgage rates are impacting on people’s savings.
“For us now, our focus really is on the budget in the autumn and just striking the right balance between providing support to businesses and households while at the same time not doing anything that would start to push inflation back up again,” he said.
“Because, thankfully, now inflation is falling. That is a good thing; it is important for our economy and it will help to take pressure off people eventually when it fully washes through.
“We just need to make sure we get the right balance between supporting people while not beginning to push inflation back up at a time when it is falling.”
AIB says it will continue to keep its deposit rates and product offering under review.
