The European Central Bank’s multiple interest rate increases since last summer have inflicted significant financial pain on tens of thousands of Irish mortgage holders, with many more likely to feel the sting of soaring rates in the months ahead.
While the impact of the successive hikes on borrowers has been well documented, less notice has been paid to savers. They are being hit hard too – and on multiple fronts – as inflation erodes the value of the money they have on deposit. Irish banks have shown themselves to be extraordinarily slow at passing on even a small fractions of the ECB interest rate increases to those who are in the fortunate position to have money to set aside.
And there are many people in that position. Over the course of the pandemic large numbers of Irish people developed a serious savings habit and it is one which has endured, with well over ¤130 billion now on deposit across all of Ireland’s financial institutions. Few if any of those with money saved are receiving anything close to the interest rates currently on offer from the ECB to Irish banks with cash on deposit in Frankfurt.
The ECB’s deposit rate – the rate it pays banks who leave overnight money with it – currently stands at 3 per cent ,or over six times the deposit interest rate some Irish banks are typically offering customers. Banks say they have also been slow to pass on rate rises to borrowers – but this is now clearly happening.
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Banks will argue that they are using the higher rates they are getting to replenish cash reserves, following eight years of paying the ECB to store their customers’ money. They will point out that they did not, in the main, pass this cost on to savers here.
That argument does have some merit – but it does not mean they can sidestep questions about their handling of their customers savings for much longer . In the face of rising profits being made by banks, those with money on deposit are well within their rights to expect at least some meagre benefit from the rate increases being rolled out across Europe.