SO, WHO LIKES easy money?

“Me, me, me!” the cries ring out from readers.

But they mask an untruth – no matter what they might say out loud, the actions of Irish savers speak louder.

And they are not taking easy money when it’s on the table.

Yep, it’s another article about savings deposit rates.

Irish consumers are really good at saving – nationwide, we have almost €160 billion sitting in deposit accounts.

But about 90% of those funds are being held in instant access current accounts, where savers get paid basically zero interest.

This is despite the fact that interest rates shot up in recent years, with many companies now offering rates of around 3%.

What this means is, Irish savers are losing out on significant amounts of money, as they don’t take advantage of high savings interest rates.

Say for a deposit of €20,000 left in a 3% account for a year. After deducting DIRT, a tax on interest earned, of 33%, you get back €20,400. An extra €400, just for moving your money from one account to another. Not quite doing nothing, but not exactly climbing Everest either.

But hey, we’ve heard this one before, right?

Old-Man-Paul here goes yelling at a cloud for a while about how Irish savers need to move their cash to get a better return, readers politely look on, and then we all go on with our day after.

Except this time, readers should take notice – because it’s likely that those good savings deals will vanish very quickly in the near future.

During the week, Bank of Ireland announced it would cut interest rates on its 12 and 18-month fixed term deposits.

And to be fair, it’s not only the Irish firms – for example, Revolut launched a 2% instant access savings rate early in 2024 to much fanfare. Before the year was out, that was cut to 1.7%.

Why are lenders cutting their rates? It’s because the European Central Bank (ECB) has started cutting interest rates.

In late 2023, the ECB central deposit rate hit a high of 4%, as the regulator was trying to rein in inflation. The theory is that raising interest rates makes borrowing money more expensive, dampening consumer demand and reducing price growth.

This looks to have largely been borne out – eurozone inflation, which surged to 10.6% in October 2022, was at an annual rate of 2.4% as of December 2024. This is very close to the 2% the ECB was targeting at the time when it started raising rates.

So, with inflation now less of a concern, the ECB is instead worried about low eurozone economic growth – the bloc’s GDP is expected to have risen by just under 1% in 2024, a pretty weak rate of expansion.

Cutting rates is aimed at encouraging the reverse of what we just described – lower rates should, in theory, lead to people borrowing more money. This then leads to more spending and investment, which leads to more economic growth.

The ECB is set to cut rates by 0.25% at the end of January, with most analysts expecting a cut of about 1% over 2025.

What does this all mean for the Irish consumer?

It means if you want to get a good deal on your savings – do it fast.

The best rates on offer for savings products are currently about 3%, depending on the lender and product you use.

So if you put say €20,000 on deposit at 3% for a year, you’ll get back €600 – and then €396 after paying 33% DIRT.

But these deals won’t last for long. Last year, many lenders were offering rates of up to 4.2% through Raisin.

Going back to our €20,000 deposited for a year example – that would be €840, or €554 after DIRT.

So a cut in the rate of just over 1% means you get about €150 less.

The rates on offer are likely to fall by another percentage point by the end of 2025. Say our consumer puts their money into a 2% deposit at the end of the year – they’ll get about €264 back after tax. Compared to €396 if they get a 3% rate now. Basically, acting later rather than sooner costs €132.

These numbers may not seem amazing – but they’re significantly better than the near-0 return you’d get if you instead let your money sit in an on-demand account.

People with savings which they know they won’t need immediately could be wise to lock in the better savings rates while they’re still available.

It’s a way of earning some extra money on your cash, rather than having those profits go to your bank.

And the above was only for a €20,000 example. For someone with say €40,000 in savings, putting their money into a 3% deposit vs a 2% (likely by the end of 2025) means they will likely get about €528 back instead of approximately €792. A difference which is starting to become substantial.

There are a variety of companies which offer these better rates, including online platform Raisin, Revolut, Bunq, etc.

Once you make sure the company is registered with the Central Bank and covered by the European Deposit Guarantee scheme – which all of the above are – you’re good to go. The guarantee means your funds are as secure as if they were with an Irish lender, with deposits up to € 100.000 per holder guaranteed.

There is some form-filling involved in getting set up with most of these platforms, but it’s nothing massively strenuous, and could be worth it depending on how much you put on deposit.

But hey, why go through the hassle at all, right?

The perceived difficulty of moving money is one of the main reasons why Irish people don’t do it.

That, and the fact that there is a legitimate concern around customer service for many of these online lenders – trying to speak to a human on the likes of Revolut can be akin to trying to uncover the exit of a Greek labyrinth.

So again, it comes back to – why bother?

Well, it just depends on what you want to do with your money.

Consumers who are nervous with their cash could be forgiven for not taking a perceived risk with tens of thousands of euros, to get back a few hundred in a year’s time.

But it’s with reiterating, one last time – this is what Ireland’s banks are relying on, and it’s something which has helped them to make enormous profits.

And it’s largely why the savings products on offer to you with our high street lenders are so poor.

Irish banks were notoriously slow to pass on the benefits of higher interest rates to their savers. So slow, their inaction briefly became a major political issue.

They did eventually move – likely not due to calls from politicians, but instead because of the fear of their customers moving deposits en masse to the likes of Revolut and Bunq.

This is something which hasn’t really happened, at least in significant numbers.

And the likes of Bank of Ireland now feel comfortable in cutting their deposit rates again, indicating the deals on offer for customers of Ireland’s high street lenders will soon get even worse.

At the end of the day, each customer has to weigh it up for themselves – but if our savings habits don’t change, don’t expect the banks to either.