# Are deposit rates likely to go up?



## Evander73 (26 Apr 2010)

I've a lump sum to reinvest. My current bank is offering 3.5% which appears to be the best offer on the market at the moment. I don't envisage I'll need the money in the medium future i.e. 3-5 years, so in light of the low deposit rate on offer at the moment I'm thinking of putting it into An Post savings bonds - 3 or 5.5 years. It gives a guaranteed return of 10% and 21% respectively (DIRT free) therefore equivalent to 4.3% and 4.7%.

Question is - what's the general concensus with regards to the trend of deposit interest rates over the next 3 to 5 years?

I'm thinking rates are so low at the moment that they will inevitably rise over this period especially as the main ECB rate is almost certainly going to increase in the short to medium term - but when and by how much is the thing - or is this a real crystal ball question?

Sorry, I realised (after posting) this should probably have been in the 'Deposits' forum - can't figure out how to move it!


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## JoeB (27 Apr 2010)

I think the Post Office rates would be about 3.23% and 3.52% based on the returns you mentioned.


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## pebbledash (27 Apr 2010)

Bank of Ireland have been trying to get me to move a lumpsum to their deposit account. They are saying that rates are going to go down in the next few weeks. I wonder if this is true or do they just want to scare me in to a decision?


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## Tentman (27 Apr 2010)

Right enough, they are planning to raise mortgage and reduce deposit rates, as reported in today's Indo.Timescale uncertain at present.


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## LDFerguson (28 Apr 2010)

The European Central Bank (ECB) base rate is historically low at present.  This will almost certainly go up.  The questions is when, rather than if.  Some are betting on late 2010; others say it will be 2011.  

However, many banks are trying to raise money any way they can, so the banks are likely to lower rates for deposits even if the ECB puts up the base rate.


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## Conan (28 Apr 2010)

Many Irish Banks have been paying deposit rates (not immediate access) well abovce the ECB rates for some time (e.g. 3% on 6 month money). It is a certainty that these rates will reduce in the coming weeks/months irrespective of what the ECB does. 
In the light of the current currency/Greek crisis, it is likely that any intended increase in the ECB rate (which was expected in late 2010) will now be deferred.


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## Lightning (4 May 2010)

Conan said:


> Many Irish Banks have been paying deposit rates (not immediate access) well abovce the ECB rates for some time (e.g. 3% on 6 month money).



They have been paying above ECB for years. Even before the crisis it was common for rates to be significantly above ECB. 

Euribor and the ECB rate are not the relevant benchmark (except for the likes of Rabo). 

Irish banks can't borrow Euribor, let along ECB. Some of their borrowing as high as 7% from the markets. 



Conan said:


> It is a certainty that these rates will reduce in the coming weeks/months irrespective of what the ECB does.



Disagree. 

Banks still need to increase their deposit to loan ratio's. In Spain and some other European countries rates are increasing. Spanish deposit rates are now typically 4%. 

Rates have stabilised in recent weeks. Some have gone up, some have gone down. It is not a certainty that they will decrease.


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