Interest rates have been the big story for Irish savers, borrowers, and investors over the past two years. After a rapid series of hikes from the European Central Bank (ECB) to tackle inflation, we’re now seeing the dial turn in the opposite direction.
So, what does that mean for your money? Here’s a closer look at where interest rates are headed — and how that could affect your mortgage, savings, and your investment plans.
ECB rate cuts are back on the table
The ECB’s main interest rate — the one that drives everything from mortgage costs to savings account rates — currently sits at 2.25%. The fall has been rapid: at the start of this year, the rate was 3.0%.
Markets are now widely expecting another rate cut in June 2025, likely bringing the deposit rate down to 2.0%. After that, we may see a pause, with the ECB taking time to assess how the economy is responding.
The good news? Inflation is under control across much of the eurozone (stable at around 2.2%), and there’s room to ease debt pressure on households and businesses.
Mortgage rates are (slowly) on the way down
For Irish mortgage holders, this shift is already feeding through — though at different speeds, depending on your loan type.
Tracker mortgage holders are already seeing lower repayments as ECB rates fall.
Variable rate customers may get some relief in the coming months, but it tends to take time — and lenders don’t always pass on the full cut.
If you’re on a fixed rate, nothing changes until your term ends. But now could be a good time to review your options and prepare for your next move.
Some lenders are already adjusting. For example ICS Mortgages recently cut fixed rates by up to 0.24%. And AIB, Haven, and EBS (all AIB-owned) have reduced some rates by as much as 0.75%.
That said, Irish mortgage rates are still on the high side compared to the eurozone average, and new entrants are emerging at last. So shopping around or considering a switch could pay off.
What about your savings?
If you’ve been holding cash in a regular deposit account, you’ll know rates haven’t exactly been exciting — even during the ECB’s rate-hiking cycle. And now, with cuts coming, returns on cash are likely to fall further.
Money market funds, which saw a large spike in popularity over the recent rate-rising cycle, have also seen their rates of return fall in line with interest rates. Although this is simply a sign of the money market functioning normally, investors who have placed significant funds there are re-assessing their options in light of expect lower returns.
Bottom line? It’s more important than ever to think about where your cash is placed — and whether it’s working hard enough.
Investing in a falling rate environment
It’s only a year since the European Central Bank rate was 4%. Sure, it took some effort to get a return in line with this rate. But it was possible – with very little risk to your money.
Investing your money in risk assets like bonds and shares seem less attractive in a world where 4% is available at very low risk.
That’s now firmly in the rear view mirror. It seems likely that rates will be below 2% by the end of the year. In that environment, if you’re looking for any kind of meaningful return on your money, you’ll need to bear the risk of short-term volatility for the prospect of higher long-term returns.
Lower interest rates often give a boost to investment markets, especially bonds and growth stocks (whose long-term growth has a higher value net present value). If the ECB continues to ease policy, we could see further upside in areas like Eurozone government bonds, investment-grade corporate debt, and equity markets, particularly in sectors sensitive to borrowing costs like real estate and infrastructure.
If you’re investing for the medium to long term — such as for retirement, a house deposit, or a child’s education — now is a good time to review your portfolio and make sure it’s aligned with the new rate environment.
Interest rates in Ireland in 2025 are heading lower
Whether you’re thinking about fixing your mortgage, switching your savings strategy, or rebalancing your investments, now’s the time to take stock.
Need a hand figuring out what it all means for you? At Moneycube, we help people across Ireland grow their money with clear, jargon-free advice.
