PERSONAL FINANCE:Your queries answered

Q

I opened an EBS five-month fixed-term savings account which is due to mature on February 28th, 2011. In the meantime, I have found a property I wish to purchase and want to withdraw my funds.

There is a provision in the terms and conditions for a discretionary withdrawal but, having spoken to the savings team assistant manager, I have been informed that the EBS is not is a position to facilitate me. Further, the only situation in which they will release the funds is serious illness. I was also told that my only other avenue was to write a letter of complaint to the member relations department, but that that would not alter the decision. What options do I now have to gain access to my money?

- Ms RM, e-mail

A

I doubt you have any real prospect of getting access to your funds. You invested only at the start of October and the building society would be entitled to wonder why you would lock your funds into a fixed-term account if you were in the market for a property purchase requiring those funds.

You note that the terms of the product provide for “a discretionary withdrawal” but this would normally require something more than an alternative investment opportunity.

Savings institutions are struggling to attract deposits in the current climate and are understandably reluctant to agree to early redemptions. They will have worked on the basis that they had the cash for five months.

You could, of course, take the assistant manager’s suggestion and make your case to the member relations department. I would suggest you do. I agree it is unlikely to be successful but a refusal leaves you no worse off than you are now.

On the plus side, the property market remains in the doldrums so it is quite likely this property will still be on the market in February. There is, in any event, nothing to stop you approaching the property owner with an offer based on a closing date post-February 28th.

Couldn’t savers give the banks the funds?

Q

Given the high cost of State borrowings and the interest charged to banks on world markets, why are the deposit interest rates on offer so low and the National Solidarity Bond returns unattractive? Surely a higher interest rate to personal savers would provide less expensive funds to the State and the banks to lend.

Do you expect deposit interest rates to rise in the near future?

- Mr DF, e-mail

A

You are correct that higher interest would encourage people to save more with Irish financial institutions. However, the flip side would be higher interest rates for borrowers.

In relation to the banks’ cost of borrowing, they haven’t been in the market for some time, precisely because of the rates that were being sought. Instead, they have relied on funding from the European Central Bank which is available at far better rates.

Government borrowing costs have only really escalated dramatically in the past six months. The savings rates on State products and the National Solidarity Bond were set earlier. Deposit interest rates are unlikely to rise noticeably any time soon.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into. Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com