What’s next for interest rates in Ireland?

In June 2024, the European Central Bank (ECB) cut its benchmark deposit rate for the first time in almost five years, to 3.75%. Another rate cut followed in September, leaving the main deposit rate at 3.50%. In October, the ECB announced a cut to 3.25%, and then a further reduction to 3.15% in December.

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

Inflation in Ireland increased to 1% in December, up from 0.7% in October.

The ECB cut interest rates four times in 2024. So, what does this mean for Irish savers?

While this will drive down mortgage rates, it will also impact rates for savers. Time could be running out to take advantage of strong rate offerings, and now might be the ideal time to lock your money away.

Following 10 consecutive rate hikes that began in July 2022, the ECB lowered its record-high deposit rate by 25 basis points in June 2024. It was cut again in September, October and December. The main deposit rate currently stands at 3.00%.

According to figures from the Central Bank of Ireland, the weighted average interest rate on new Irish mortgage agreements at the end of October 2024 was 4.03%, the lowest since May 2023.

Irish mortgage rates are now the joint sixth highest in the eurozone, where the average rate is 3.59%.

It looks as though interest rates in Ireland will decrease, following the recent ECB rate cuts, but this is dependent on the wider economy, and what happens in the eurozone.

Many experts are predicting further cuts in 2025. However, if inflation rebounds, the ECB may be more cautious when it comes to rate easing.

Put simply, ECB rate cuts mean that high savings interest rates may not be around for much longer.

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

• It's important to note that interest rates can vary depending on the lender, and the type of savings account.
• 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 demand deposit 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.

So, what's the best savings account for you? This will depend on various factors, for example the amount you have 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 opt for a fixed interest rate product. This type of savings account typically offers the most competitive rates, and is ideal for long term savings goals.

Public Expenditure Minister, Paschal Donohoe, has said:

“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 competitive interest rates whilst they're still around, or to protect yourself and your family from unforeseen financial expenses, opening a savings account will give you more for your money.

To find the best savings account for you, register for a free Raisin Account today and compare interest rates from banks across Europe.