The European Central Bank (ECB) reduced its key lending rate to just 0.15pc last week.  While great news for “Tracker Mortgage” holders it is an ominous sign to all savers (deposit holders).

Not only that, the ECB further warned that it would charge our Banks for leaving spare cash with them.  The ECB deposit rate is in negative territory at -0.1 per cent, which effectively means that Banks pay to keep cash with the ECB overnight.

So what does this mean?

• Interest rates are low are likely to remain low.
• The current ECB strategy is to try and raise spending and this in turn, will drive inflation.  Ultimately this will help us emerge from our excessive debt.
• We need to reappraise how we save and where we save?  The traditional methods will no longer work.

Savers will take a serious hit with the latest ECB move.  Interest rates on deposits while low before will get even lower.  The ECB cut to the base rate will mean that our local banks will have to cut their deposit rates even further.  When you consider that the DIRT rate is now 41%, the saver is going to get a very raw deal.

So what do you do?

• Seek Independent Advice from a suitably qualified professional.
• Only keep on deposit what you need or expect that you will need.
• Look to savings options like the Post Office (some products are DIRT Free).
• Seek appropriate investment options (non deposit based) that suits you.  Your adviser will guide you.

Eamonn Kielty,
Money Plus

Contact Eamonn and the team at Money Plus for more information on 071 919 4000 or by email on info@moneyplus.ie.

See www.moneyplus.ie for more information.