Friday, October 28, 2011

Run on the Irish banks continues

According to an article in the Independent, Ireland's banks are now paying depositors more for their money than they are charging for a mortgage loan.

Regular readers know that the reason the banks are offering to pay so much for deposits is that individuals and firms do not trust that they are solvent.  By forcing the depositors to keep their money with the bank for at least one year, the banks are hoping to slow down the run on deposits they are experiencing.
SAVERS have seldom had it so good.  So desperate are our banks for us to lend to them that they will actually give you a higher interest rate on your deposit than they are charging on some mortgages. 
Money that is deposited for a year or more is the most sought after with interest rates in excess of 4pc not unusual. 
Some banks are advertising deposit rates that are almost the same as their mortgage rates. 
Take AIB. It is currently offering 4.1pc on deposits for a 12-month term. 
The same institution is offering mortgages for new buyers as low as 3.34pc. 
Simon Moynihan of the price comparison website says this means those with savings are in a very lucky position. 
"Instead of lending us money, the banks are now desperately trying to get us to lend money to them. 
"But they don't want to be troubled with pesky withdrawals, so they're offering the highest interest rates on accounts where money is locked down for a year or more."

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