LAST UPDATE | 23 hrs ago

BANK OF IRELAND is set to cut interest rates on its 12 and 18-month fixed-term deposits by 0.25%.

These reductions will take effect on Thursday, 9 January.

It will result in the 12-month AER (Annual Equivalent Rate) falling to 2.25%, while the 18-month AER will decline to 2.73%.

A spokesperson said customers who are already in the process of opening a 12 or 18-month term deposit account can still avail of the existing rates if they open their account by 8 January.

Meanwhile, the interest rate for the Bank’s Advantage 6-month fixed-term deposit will not change on 9 January. 

There are also no changes to any of Bank of Ireland’s other deposit products, including SuperSaver, Notice or Instant Access Demand.

It’s the first time that Bank of Ireland has cut rates on certain products since the European Central Bank (ECB) started to cut interest rates in the Eurozone.

In December, the ECB cut interest rates in the Eurozone from 3.25% to 3%.

It was the third cut in a row and the fourth since June.

Daragh Cassidy of Bonkers.ie said that while “the news isn’t surprising, it should serve as a wake-up call to Irish savers to do something with their money before rates fall further”. 

“Last year the ECB cut interest rates four times,” said Cassidy.

“And it’s likely it will cut rates another three or four times this year too.”

He noted that online banks Revolut and N26 have lowered their savings and deposit rates in response and remarked that it was “only a matter of time before the main Irish banks did the same”.

Cassidy said he expected PTSB and AIB to announce similar reductions “over the coming weeks”.  

However, he said that the “bright side” is that Bank of Ireland is “still offering up to 3% on some of its other savings products”.

“And AIB still offers up to 3% too,” added Cassidy.

“But I can’t imagine these rates will be around for much longer.”

Cassidy said that Irish households have close to “€160 billion resting on deposit but the majority of the money is still in accounts that pay little to no interest”.

“So if anyone has savings, I’d encourage them to lock into the higher rates while they’re still available.”

Asked about the interest rate cuts on deposit accounts today, Taoiseach Simon Harris said he spoke to a number of banks last year on the issue of interest rates, stating that there ”has to be a kind of fairness”.

“If you’re deciding because the ECB or others have lowered interest rates, if you’re deciding to lower them on deposits, well then equally, you should be looking at what you’re charging on the other side of the ledger, in terms of the costs of mortgages,” said Harris. 

“I did get the sense, not to speak for individual banks, but I did get the sense that we were moving into an environment of reducing interest rates, or at least over time, on mortgages, which I think is a good thing,” he added. 

“The quid pro quo then, obviously, is that sometimes that can have a knock on effect on deposits,” Harris acknowledged.

Speaking about the matter in terms of people saving to buy their own home, Harris said there is a need to provide people with schemes and incentives to help first-time-buyers get a deposit.

“I do know that people are paying a lot of tax in Ireland and are trying to save money, and sometimes you need a scheme to bridge that, particularly at a time when there still isn’t adequate housing supply,” he said. 

With reporting by Christina Finn