AIB cuts its deposit rates

AIB is the latest bank to announce that it’s cutting its savings and deposit rates. 

From today, it’s reducing the rate on two of its fixed-term deposit accounts by 0.25 percentage points. 

The bank’s two-year fixed-term account will now offer 2.77% AER (or 5.58% in total before tax over the two years). And its one-year account will offer 2.25%.

No change is being made to any of AIB’s other savings and deposit rates for now. For example it’s still offering 3% interest on its Online Regular Saver account.  

Better news…

In slightly better news, AIB is reducing the minimum amount required to open one of its fixed-term accounts to €5,000.

Previously you had to place at least €15,000 in the account, which would be a significant amount to some people.  

So the new €5,000 limit should make the account much more accessible to savers, even if the rate will now be slightly lower. 

The new lower threshold will apply to accounts opened in branches from 5th February and for accounts opened through the AIB mobile app a few weeks later. 

Where are savings rates going?

Since the start of the year Bunq, Bank of Ireland, Revolut and N26 have all reduced their savings and deposit rates. So this move by AIB wasn't unexpected. And bonkers.ie has been warning for months now that savings rates were going to start falling. 

Unfortunately, we’re likely to see rates fall even more over the coming months. This is because the European Central Bank (ECB) is likely to continue to cut rates over the coming year. Perhaps as many as four times. 

By the end of the year the best savings and deposit rate on offer could be only 1.50%. Around half what it is now.

Irish households still have a huge amount of money on deposit where it’s earning little to no interest. For various reasons, Irish savers have been hesitant to chase after the higher rates of interest that have been on offer for the past 18 months or so. Much to the delight of the banks of course which have saved on billions of euro in interest!

So if you have savings, do something with them before rates fall further. As there isn’t much time left. 

Other savings option 

However there are other options for your savings. And as interest rates start to fall, you might want to consider them. 

If you have a longer-term savings goal, then placing your money into a life assurance investment policy with the likes of Irish Life, Zurich or Aviva, which will invest in a mix of stocks, commodities, property and bonds, might be a better option as it will provide the potential for far higher returns. 

And using your savings to top up your pension is another good option. A lot of people keep savings for the proverbial rainy day. But there are likely to be a fair few rainy days in your retirement too, especially as most people are vastly underfunding their pensions.  

Using your money to invest in a home retrofit to help reduce your energy bills and make your home more comfortable is another option.    

You could also use your savings to knock a chunk off your mortgage and save on interest. But there are pros and cons to this so weigh them up carefully. But if you have €200,000 left on your mortgage over 15 years and are paying a rate 3.50%, you’d save around €5,700 in interest over the remaining term if you paid €20,000 off the capital.

Review all your options 

You can easily find the best return for your money on bonkers.ie. 

Use our savings comparison tool to compare rates from the likes of AIB, Bank of Ireland, PTSB, Trade Republic, Raisin, Bunq, N26 and more in just minutes. 

Or check out our in-depth article on some alternative savings options for your money.