Bank of Ireland increases its deposit rates

The main banks have come under huge pressure over the past few weeks to improve their savings and deposit rates. And it would appear Bank of Ireland (BOI) has caved in.

BOI is increasing the rate on most of its savings and deposit products again and will now offer a market leading rate of 3%. 

Here's a look at what's been announced... 

Bank of Ireland's new savings and deposit rates

• Super Saver accounts: The Super Saver account is a regular savings account that allows you to save up to €2,500 a month. The interest rate will be increased to 3% (previously 2%) for the first 12 months. After the initial 12 months, a rate of 2% (previously 1%) will apply on balances up to €30k. 
• Mortgage Saver accounts: The interest rate will increase to 2% (previously 1%) on balances up to €15k. A rate of 0.50% (previously 0.01%) will apply on balances above €15k. And you can get bonus interest of €2,000 if you draw down a Bank of Ireland first-time buyer mortgage within 30 months of opening your account.
• Regular Saver accounts: The interest rate will be increased to 2% (previously 1%) on balances up to €12k. A rate of 0.50% (previously 0.01%) will apply on balances above €12k.

All accounts are available to both new and existing customers. Existing customers don’t need to take any action, as the new rates will automatically apply.

Those with a lump sum can put their money into a fixed-term deposit account account. BOI now offers the choice of a six-month, one-year or two-year account, paying up to 2% interest. And it's now offering a new ‘10% Access’ feature which allows savers to access up to 10% of the initial balance without incurring a penalty. 

The interest rate on all these accounts will increase on 8th September.

Good news

This is obviously good news for savers and it's expected that AIB and Permanent TSB will also increase their rates over the coming weeks, if not days.

However higher deposit rates could be at the expense of higher mortgage rates for first-time buyers. So we need to be careful what we wish for perhaps. 

It's likely BOI will also announce a hike to its mortgage rates over the coming weeks too - though it has to be said its fixed mortgage rates in particular are very low given where ECB rates are right now.

The devil is also in the details. The new 3% rate from Bank of Ireland is only available for one year on its SuperSaver account - it then reverts to 2%. And it’s a regular savings account. So you can’t deposit a large lump sum for example.

Paltry returns 

At the moment Irish households have a huge amount of money in so-called demand deposit accounts where you have almost instant access to your money. The rates on offer here are miserly and can be as low as 0.10% - which is what BOI now offers.

However if you're happy to lock your money away for even a year or two you can get much better returns. So if you have a large amount of savings in a demand deposit account or your current account, look at moving your money to a fixed-term savings account - provided you don’t require access to the money in the short term of course.

I would encourage customers to switch their money from their current account to a savings or deposit account where they will benefit from interest payments. The market has gone from eight years of negative rates and, now that savers can benefit from better rates, we are encouraging customers to take action, start a savings habit or move money into interest earning products or accounts. Customers can get a better return and enhance their financial wellbeing.

Susan Russell, CEO Retail Ireland, Bank of Ireland

Alternatives to the main banks  

While it's great to see savings rates begin to creep up, the returns on offer are still well below the rate of inflation. And of course you’ll pay DIRT of 33% on any gains you make.

Also, deposit rates of over 4% are now available in many countries throughout Europe. So the rates on offer from the main banks are still quite low in comparison.

But there are other options for your savings other than the main banks. Check out our article on alternative savings options for more information.

We also recorded a podcast on alternative savings options if you’d prefer to sit back and listen instead - you can find that episode here!