Savers put €6bn into higher-interest accounts but most depositors still earning little or nothing

The move to take money out of bank accounts that are paying little or nothing is in line with advice from personal finance experts.

But despite the movement of €6bn in higher interest-paying accounts, some 90pc of Irish household deposits remain in accounts paying little in interest, figures from the European Central Bank show.

Overnight accounts, which include current accounts and instant access accounts, pay interest of an average of just 0.13pc.

The backlash over the failure of banks to fully pass on the 10 rises in European Central Bank (ECB) interest rates to savers has prompted AIB, Bank of Ireland and PTSB to bring in a small number of accounts paying better interest rates.

However, these come with conditions attached.

Today's News in 90 seconds - 2nd April 2024

The three main banks have said in their earnings reports in recent weeks that they expect customers to shift more of their savings into higher-yielding accounts this year.

Figures extracted from the ECB by independent economist Simon Barry show Irish households have now begun to respond to the higher interest rates available on term deposits.

A term deposit is an account for a fixed period of time that pays a set interest rate.

The average interest rate available to Irish households for new term deposits in January was 2.51pc.

This is compared with the average rate paid on overnight balances of just 0.13pc, according to Central Bank of Ireland figures.

Mr Barry said the ECB data shows that the amount of money held in overnight balances has fallen sharply by €3.9bn last month.

At the same time there has been a major increase in the flows of money into term deposit accounts where overall balances have risen by €5.9bn since April last year.

He said that since the summer there has been an average of €700m a month flowing into term deposits.

At the same time there has been an average of €500m a month flowing out of overnight accounts.

But the despite the flight of money out of low-interest paying overnight deposit accounts is low by European standards.

Households still have 90pc of their savings in overnight deposits, the figures for February show.

“The extremely high percentage of deposits held as overnight balances is not just exceptional relative to domestic historic norms.

“Ireland’s household deposit market is also a total outlier within the Eurozone, with the overnight share in Ireland still the highest of all member states despite the recent modest fall,” Mr Barry said.

He said that across the entire Eurozone the overnight share in total household deposits is now less than 55pc.

The figures also show that household deposits at Irish banks and credit unions reached a new record high last month.

An additional €1.1bn was saved in February, to take the total to €153.6bn, Mr Barry said.

The renewed increase in February more than reversed the €200m drop in January, according to Mr Barry.

Last month German online neobank, N26, began offering users in Ireland access to a higher yielding instant access savings account.

The Instant Savings feature will enable Irish based customers to earn up to 4pc interest a year on their savings.

And rates of 4pc and above are available from other providers such as Raisin and Trade Republic, which both facilitate people putting money into banks on the Continent.