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%. More rate cuts have followed, and the main deposit rate currently sits at 2.75%.

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 1.9% this January, up from 1.4% in the 12 months to December 2024.

The ECB has cut interest rates five times since June 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 competitive fixed rate offerings.

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 has been cut another four times since, and the main deposit rate currently stands at 2.75%.

According to new figures from the Central Bank of Ireland, the weighted average interested rate on new mortgages fell to 3.8% in December last year, down from 3.97% in the previous month and the lowest level since April 2023.

Irish mortgage rates are now the seventh highest in the eurozone, where the average rate is 3.35%.

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.

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

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

Here are some things for Irish savers to consider 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.