What’s next for interest rates in Ireland?

After years of historically low interest rates, interest rates in Ireland are currently rising, in line with interest rates across the Eurozone. The European Central Bank (ECB) has raised its benchmark interest rates by 4.00 percentage points between July 2022 and the end of 2023, in an effort to combat high inflation.

Read on to discover if and when interest rates are likely to increase or decrease again and what this could mean for savings accounts.

Last updated: March 2024

As of 20 September 2023 (the most recent announcement), the ECB’s main refinancing rate is 4.50%.

The marginal lending rate is 4.75%, and the deposit facility rate is 4.00%. These rates are used as a reference point by Irish banks when setting their own interest rates on loans and deposits.

As of January 2024 (the latest period available) inflation in Ireland is at 4.1%. Annual price growth rate has now fallen below 5% for three consecutive months.

Women in Ireland are more than twice as likely as men to rely heavily on the State pension for their income in retirement, according to a new survey by Retirement Planning Council of Ireland. The survey also showed that 68% of women expected to depend on the State pension largely for their retirement income, compared with just 32% of men.

Meanwhile, in better news for young people, an enormous global wealth transfer from boomers to younger generations is on the way, according to Knight Frank’s wealth report. The report finds that, over the next 20 years, an enormous transfer of wealth is set to occur as those aged 60 and over start to hand over their assets to younger generations.

Elsewhere, the Central Statistics Office have also updated their Consumer Price Index basket of goods and services, adding vapes, air fryers and vegan foods, and removing landline phones, digital cameras and Swiss rolls. The list of around 600 products in the CPI is adjusted every five years, when the comparison year is updated and items are added or removed based on popularity.

Interest rates in Ireland have risen sharply over the last 12 months. The European Central Bank (ECB) has raised its benchmark interest rates by 4.00 percentage points since July 2022, in an effort to combat high inflation.

Irish mortgage rates have already started to rise in response to the ECB’s rate hikes. According to the Central Bank of Ireland, the average interest rate on a variable mortgage was at 4.2% in February 2023 – down from 4.46% in October 2023, but still up from 3.63% in April.

The latest European Central Bank survey of professional forecasters predicted that the ECB interest rate to stay at 4.5% in the first half of 2024 before falling to just over 4% by the end of 2024.

While rising interest rates may be bad news for borrowers, savers typically stand to gain. Higher interest rates on savings accounts will help to offset the impact of inflation on your savings, and savers in Ireland can expect to see higher interest rates on their savings accounts in the coming months. However, it is important to note that savings rates are still relatively low compared to historical levels.

Some Irish banks have already started to raise interest rates on their savings accounts, albeit slowly. Other Irish banks are expected to follow suit in the coming weeks and months. However, it is important to compare different savings accounts before you switch, as interest rates can vary depending on the lender and the type of savings account.

Here are some tips for savers in Ireland in the current interest rate environment:

• Shop around for the best savings interest rates. You can use a comparison website to compare the interest rates offered by different Irish banks.
• Consider switching to a fixed-term savings account. Fixed-term savings accounts typically offer higher interest rates than easy-access savings accounts, but you will not be able to access your money during the fixed term.
• Check that your savings account is covered by the Deposit Guarantee Scheme. The Deposit Guarantee Scheme protects your savings up to €100,000 in the event that your bank fails.

The best savings account for you will depend on various factors, such as if you have a lump sum to invest and whether you’ll need access to your money. If you can afford to lock your money away for a set period, you might want to opt for fixed interest rate products. They typically offer the most competitive rates of all account types and are ideal for long term savings goals.

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Public Expenditure Minister, Paschal Donohoe, has said: “It’s up to people who have money they are going to put on [a] deposit to get the rate of return that they think is best for them. Looking to put money in other parts of Europe, and other banks elsewhere in Europe, is not an unpatriotic act. It’s the way the single market functions.”

Regardless of what happens to the interest rate in Ireland, there’s never a bad time to save. Whether it’s to take advantage of future spikes in interest rates or to protect yourself and your family from an unseen financial fallout, opening a savings account will give you more for your money.

To find the best savings account for you and compare interest rates on savings accounts, register for a Raisin account and log in to apply.