BANK OF IRELAND HAS increased deposit rates across its Savings and Deposit accounts.
The changes will take effect from 8 September and will be available for new and existing customers.
Existing customers do not need to take any action and the new rates will apply automatically.
The European Central Bank’s main lending rate now sits at 4.25%, the highest it has been since 2001.
However, Irish banks have been criticised for not passing higher interest rates back to savers via higher deposit rates.
Earlier this month, the Banking & Payments Federation said that banks have “been slow” in passing on the full effect of ECB interest rate increases to deposit rates.
An analysis reported by The Financial Times this month also showed that Irish banks are currently the worst at passing on rate gains to savers when compared to the UK, the US, the Eurozone and 18 other European countries.
Elsewhere, Higher Education Minister Simon Harris remarked that Irish banks have been “complete and utter laggards” when it comes to passing on increases in interest rates to savers.
Susan Russell, CEO of the Retail Ireland division of BOI said today: “Since the ECB started to increase rates last year, we have made a number of improvements to our savings products.”
The latest changes, which will come into effect on 8 September, include increasing the interest rate on SuperSaver accounts from 2% to 3% for the initial 12-month period.
After this 12-month period, a rate of 2% (previously 1%) will apply on balances up to €30,000.
For MortgageSaver accounts, the interest rate is to be increased to 2% (previously 1%) on balances up to €15,000.
A rate of 0.50% (previously 0.01%) will apply on balances above €15,000.
For Regular Saver accounts, interest rates will be increased to 2% (previously 1%) on balances up to €12,000, while a rate of 0.50% (previously 0.01%) will apply on balances above €12,000.
Meanwhile, the interest rates on Demand Deposits will increase to 0.10%, having previously been 0%, and the 31 day Notice interest rate will be increased from 0.5% to 1%.
BOI has also added a “10% Access” feature to 6-month, 1 Year and 2 Year Term Deposit accounts, allowing access of up to 10% of the initial balance.
A rate of 1.5% will apply to the 6-Month Term Deposit, while a rate of 2% will apply to 1 and 2 Year Term Deposits, and this is available to both personal and business customers.
Susan Russell has encouraged 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,” said Russell.
Daragh Cassidy from Bonkers.ie noted that the main banks have come under huge pressure over the past few weeks to improve their deposit rates.
“It would appear Bank of Ireland has caved in to the pressure,” Cassidy told The Journal.
He said it is good news for savers and added that he expects AIB and Permanent TSB to also increase their rates “over the coming weeks, if not days”.
However, he warned customers to be “careful what we wish for” and warned: “I do fear that higher deposit rates are going to be at the expense of higher mortgage rates for first-time buyers.”
“The devil is also in the details,” added Cassidy.
“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. You can’t deposit a large lump sum.
Meanwhile, Russell said that BOI is “very conscious of the challenges a rising rate environment brings for mortgage customers”.
She said BOI “continue to take a very measured approach in relation to our mortgage rates” and that the bank will “continue to keep rates under review into the future”.
Daragh Cassidy of Bonkers.ie told The Journal: “I wouldn’t be surprised if Bank of Ireland also announced a hike to its mortgage rates over the coming weeks – though it has to be said its fixed mortgage rates in particular are very low given where ECB rates are right now.”
Earlier this month, opposition parties called on the Government to take action to ease the burden of mortgage interest rate hikes on Irish households.
Sinn Féin called for a temporary and targeted mortgage interest relief to be introduced, while People Before Profit’s Paul Murphy said that mortgage interest rates should be capped at 3%.
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