Rates for deposits and loans worsening, reveals Central Bank

New statistics from the Central Bank offer further evidence that the deposit boom is coming to an end for savers, with the average interest rate on household deposits declining between August and September. Mortgage rates are moving in the opposite direction, however, with the rate charged on both new and outstanding mortgages increasing during the month.

With an increasing emphasis on a return to profitability, banks are looking to improve margins by decreasing the amount they pay savers for their money, and increasing the cost to borrowers.

According to retail interest rate data from the Central Bank, interest rates on outstanding term deposits fell to 3.35 per cent in September, down from 3.41 per cent the previous month. Term deposits of up to two years also fell, declining by 0.07 of a percentage point cent to 3.47 per cent, though deposits with a maturity of more than two years have remained stable over the last number of months. They stood at 2.52 per cent as of the end of September. Rates on short-term deposits continued to decline and are now down by 0.8 per cent since January at 1.53 per cent. According to the Central Bank, deposit volumes suggest that savers are now moving out of these accounts and into longer-term deposits to avail of higher rates. But while deposit rates are falling, mortgage rates are rising. As of the end of September, interest rates on outstanding mortgages were up by 0.06 of a point compared with August, with an average mortgage interest rate of 2.9 per cent. Since the start of the year, however, rates are still down by 0.16 of a point.

When it comes to new mortgages, the average interest rate also rose, with homeowners now paying 3.12 per cent on average for either a variable rate or a mortgage fixed for up to one year. This is up by 0.21 of a percentage point on August and is higher than that across the euro zone.

Looking ahead, mortgage rates are likely to rise again.